Abstract
Fluctuations in housing prices not only affect the financial well-being of corporations and households, but also influence the stability of economies. One of the results derived from such fluctuations is known as price bubbles. We aim to investigate whether such housing price bubbles did exist in two different residential markets of Hong Kong. The results indicate that there are bubbles in the Hong Kong housing markets before 2003, and later within the luxury market by 2008. As to what the government could do to curb speculative activities with regard to housing, the introduction of a capital gains tax on short-term transactions of flats as well as a higher housing supply are regarded as effective means.
Acknowledgements
This study was funded by the PolyU Internal Grant (1-ZV1X, G-YH27, and G-YH96).
Notes
1. According to the Immigration Department of Hong Kong, the objective of this Scheme is to facilitate the entry for residence by capital investment entrants (the entrant), i.e. persons who make capital investment in Hong Kong but would not be engaged in the running of any business here. The entrant is allowed to make his choice of investments among permissible assets (i.e. real estate and financial assets) without the need to establish or join in a business.
2. Under the Application List System mechanism, any developer interested in any sites on the list can submit an application to the government with minimum offered price. If the government considers the minimum offered price is reasonable, the corresponding site will be put up for sale by auction or tender and the minimum offered price will be the upset price. It can allow the market to determine the optimum amount of land supply and the releasing time. Furthermore, it helps to avoid oversupply and to meet the actual demand for stabilizing property prices.
3. Quasi-rational behaviour is behaviour which is assumed to be not rational yet consistent (Raftery, Citation1999).