Impact of Political Incidents, Financial Crises, and Severe Acute Respiratory Syndrome on Hong Kong Property Buyers

In this paper, the first part of our study, we use a linear statistical technique to examine the impact of the announcement of China's decision to take back Hong Kong from the United Kingdom in 1982, the Tiananmen Square incident of 4 June 1989, the Asian financial crisis (AFC) of 1997, and the outbreak of severe acute respiratory syndrome (SARS) in 2003 on Hong Kong's housing market in terms of prices. A total of 11362 residential transactions from a cluster of data for a large private-housing estate, considered to be representative of Hong Kong's private residential market, were used to test four hypotheses that evaluate the impact of shocks on property prices through the use of a hedonic price model. The influences based on the statistical findings, which satisfy the relevant goodness-of-fit tests, are (a) that the sovereignty crisis exerted immediate significant negative price effect, but property prices rebounded after a big decline when open diplomatic dialogue between the Chinese and UK governments began, (b) that the Tiananmen Square (4 June) incident had no significant price effect; (c) that the AFC caused a drastic decline in property prices; and (d) that the impact of the SARS outbreak was significantly negative for Amoy Gardens but not so for estates with fewer reported SARS cases.