The impacts of cross-border tourists on local retail property market: an empirical analysis of Hong Kong

ABSTRACT

Hong Kong as a small city has witnessed a drastic change in the number of short-stay and same-day tourists from Mainland China ever since the relaxation of the tourism policy began in the early 2000’s. This study examines the impacts on the prices of retail space attributed to the substantial increase of cross-border shoppers. Based on a comprehensive retail property transaction records in Hong Kong and a semi-log regression model, our study confirms a positive impact of the number of cross-border shoppers on retail property prices, especially on the value of newer and larger-sized street-level retail shops. Moreover, we find that the effects brought on the retail property market are city-wide and not limited to specific districts which are relatively closer to the border with Shenzhen and with a higher degree of accessibility by these cross-border shoppers. This paper is limited by a number of assumptions including travel distance of the shoppers from Shenzhen. Nevertheless, with an increase in personal travels by the affluent Mainland Chinese citizens who usually spend a lot on shopping outside China, future studies can be made in other North American or European cities for comparison.

KEYWORDS:

• Cross-border shoppers
• border entry control
• tourism policy
• retail property market

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1. Street-level retail properties and ground-floor shops are used interchangeably in this study.

2. http://www.wikishenzhen.com/culture-in-shenzhen/culture-halls/shenzhen-civic-center/.

3. For location map of Civic Centre Station, Shenzhen, please check: https://www.google.com.hk/maps/place/Civic+Center/@22.4974411,114.0593639,12.98z/data = !4m2!3m1!1s0x3403f40dd15d84f7:0x4f9d35b6b894945c?hl = en.

4. http://www.china.org.cn/china/2013-09/02/content_29893234.htm.

5. Both interaction terms MEP × SIZE² and MEP × AGE² are not included in H2, as the non-linearity effect of SIZE and AGE before and after the MEP is not the major concern of this study. The results remain intact even with these interaction terms added.

6. Source: Rating and Valuation Department’s property market information: http://www.rvd.gov.hk/en/property_market_statistics/index.html.

7. Given the building age of property being older than 33, the quartic function of age starts to give a non-negative effect on real property value. This might capture the vintage effects of the property. While some retail shops in CBD are old in terms of building age (yet refurbished), the property value remains high because of its prime location. Simply put, the building age has an unexpected positive coefficient that could be due to the omission of building refurbishment effects or demand-side components such as the locational advantage enjoyed by older buildings (Clapp & Giaccotto, 1998).

8. Similar to the AGE, the effect of SIZE is negative if the SIZE becomes more than 39,000 sq. ft., which captures the diseconomies of scale for certain threshold of retail properties’ size. The observation of subletting retail spaces in some mega retail complex is to internalise the problem of diseconomies of scale.

Additional information

Funding

This work was supported by the HKU Small Project Fund [grant number 201309176144].

Notes on contributors

Ling-Hin Li

Ling-Hin Li is currently an Associate Professor, and the Programme Director of the BSc in Surveying in the Department of Real Estate and Construction, the University of Hong Kong.

Ka Shing Cheung

William K.S. Cheung is currently a Lecturer in the Department of Property, Auckland University.

Sue Yurim Han

Sue Y. Han is a PhD student in her final year at the Department of Real Estate and Construction, the University of Hong Kong.