International Real Estate Review

The Hong Kong residential market is unique in several aspects: restricted land supply, high price volatility, high appreciation rate, a small group of large developers, and a huge public housing sector. Assuming that higher price appreciation and volatility can be attributed to the limited land supply, this study examines the relationships among developers’ housing-supply decisions, government land-supply decisions, and public housing policies. Using data for the 1973-1997 period, our result shows that an increase in land supply by the Hong Kong government may not be a solution to the perceived shortage of housing supply in Hong Kong. This finding indicates that it is important to examine developers’ profit maximization strategies when enacting public policies related to property markets.