Open AccessINTERNAL AND EXTERNAL DETERMINANTS OF HOUSING PRICE BOOM IN HONG KONG
Author(s) -
Farhad Taghizadeh–Hesary,
Naoyuki Yoshino,
Aline Mortha,
Alvin Chiu,
Niki Naderi
Publication year - 2020
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.505
H-Index - 4
ISSN - 1410-8046
DOI - 10.21098/bemp.v23i4.1043
Subject(s) - boom , real estate , price index , economics , mainland china , inflation (cosmology) , china , capital (architecture) , asset (computer security) , monetary economics , real estate investment trust , economy , finance , macroeconomics , geography , archaeology , environmental engineering , theoretical physics , computer science , engineering , physics , computer security
Hong Kong’s housing market witnessed a dramatic housing price appreciation in recent years, with the price index for private domestic housing units being three times higher than ten years ago. This trend is supported by both internal and external factors, as illustrated in this paper. By developing a theoretical model and an empirical analysis on the key variables influencing housing prices using monthly data from 1999 to 2018, we find that the main drivers of housing price appreciation are from the demand side and include income level, money supply and inflation. The main contribution of this study is the quantification of the role of Mainland China’s macroeconomic factors in housing price booms in Hong Kong. Our study shows that capital inflow from and inflation and recessions in Mainland China contribute to increasing housing prices in Hong Kong because the city’s real estate is seen as a way to preserve asset value. These findings call for the need for control of capital inflow between the two economies as well as for stricter regulations against empty houses in Hong Kong.