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House price overvaluation in Hong Kong

Author

Listed:
  • Philip Arestis
  • Ana Rosa Gonzalez-Martinez
  • Lu-kui Jia

Abstract

Purpose - The purpose of this paper is twofold. First, the authors investigate the main drivers of house prices in the Hong Kong housing market. Second, further research is undertaken to confirm the existence of house price overvaluation, which has driven the market into a bubble episode. Design/methodology/approach - First, the authors propose a theoretical framework to identify the fundamentals of the market. In the second step, they decompose house prices into fundamentals, frictions and bubble episodes for a better understanding of the evolution of house prices during the period 1996(Q3)-2013(Q3). Findings - The results of this paper suggest an eventual possible correction of up to 46 per cent of house prices with respect to their 2013(Q3) level. Originality/value - The originality of this paper is to use the procedure developed by Glindro and Delloro (2010) to analyse the Hong Kong housing market. The contribution of this paper also modifies the original Glindro and Delloro’s (2010) approach by including the Christiano and Fitzgerald (2003) filter to decompose house prices.

Suggested Citation

  • Philip Arestis & Ana Rosa Gonzalez-Martinez & Lu-kui Jia, 2017. "House price overvaluation in Hong Kong," International Journal of Housing Markets and Analysis, Emerald Group Publishing Limited, vol. 10(2), pages 282-304, April.
    • Handle: RePEc:eme:ijhmap:ijhma-01-2016-0003
    DOI: 10.1108/IJHMA-01-2016-0003
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    More about this item

    Keywords

    Asia; Housing prices; Housing market analysis; Housing affordability; Macroeconomics; Appreciation; C22; R31;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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