The development of Hong Kong housing market: past, present and future

Abstract

From previous boom-bust cycles of the housing market of the Hong Kong SAR of China, we find that the imbalance between housing demand and supply, the interaction between the stock market, financial institutions and the real estate market, and international capital flows are the key determinants of housing price movements in Hong Kong. A comparison between the current episode of high real estate prices and that in 1997 suggests that structural changes have taken place and that different underlying forces are in play, thus indicating a low likelihood of a similar crash in the housing market. However, it is still imperative for the Hong Kong SAR government to find effective ways to cool down the overheated housing market. While we agree that the actions taken by the government will be able to suppress the housing price in the long run, the short-term effect may not be satisfactory due to the time lags of these policies.

Keywords:

• Housing market
• housing crisis
• Hong Kong economy

Notes

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 As estimated by Hui and Yue (2006), the bubble was equivalent to nearly 40% of the housing price before the crisis.

2 We use the results in Table 3 as supplementary to our analysis rather than formal evidence. Specifically, we only aim to reveal the correlation between the determinants, instead of arguing causalities.

Additional information

Funding

This research is supported by the Fundamental Research Funds for the Central Universities, and the Research Funds of Renmin University of China [13XNJ003].