Determinants of Property Prices in Hong Kong SAR: Implications for Policy

 
Author/Editor: Craig, R. Sean ; Hua, Changchun
 
Publication Date: November 01, 2011
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper uses an econometric model of residential property prices in Hong Kong SAR to assess the effectiveness of alternative policies in slowing the increase in property prices. The rapid rise in property prices is well explained by macroconomic fundamentals; real GDP per capital, real domestic credit, construction costs, land supply, and the real interest rate. Policy can influence the property market though land supply and prudential and tax policy, with the latter policies taking the form of a stamp duty on property transactions and a tighter loan-to-value ratio (LTV) on lending. Land supply is the most effective policy insturment for restraining property price increases but it operates with a significant lag. The LTV and stamp duty dampen speculative activity that drives up property prices. While these policies can slow the increase in the short run, they should be guided by their long run objectives of financial stability and counteracting speculation.
 
Series: Working Paper No. 11/277
Subject(s): Economic models | Housing prices | Land prices | Price increases | Stamp duties | Tax policy | Hong Kong Special Administrative Region of China

Author's Keyword(s): Property price | Co-Integration | Land Supply | Stamp Duty | Loan-to-Value Ratio
 
English
Publication Date: November 01, 2011
Format: Paper
Stock No: WPIEA2011277 Pages: 14
Price:
US$18.00 (Academic Rate:
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