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Property bubble in Hong Kong: A predicted decade-long slump (2016–2025)

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Listed:
  • Peter Richmond

    (Trinity College)

  • Bertrand M. Roehner

    (University Pierre and Marie Curie)

Abstract

Between 2003 and 2015 the prices of apartments in Hong Kong (adjusted for inflation) were multiplied by a factor of 3.8. This is more than in the United States prior to the so-called subprime crisis of 2007. The analysis of this speculative episode confirms the mechanism and regularities already highlighted by the present authors in similar episodes that occurred previously in other countries. Based on these regularities, it is possible to predict the price trajectory over the time interval 2016–2025. It suggests that, unless appropriate relief is provided by the mainland, Hong Kong will experience a decade-long slump. This bubble took considerable proportions largely because the currency board system through which Hong Kong interest rates are modeled on US rates made it impossible to “cool the market”. In fact, it resulted in loans with negative real interest rates.

Suggested Citation

  • Peter Richmond & Bertrand M. Roehner, 2017. "Property bubble in Hong Kong: A predicted decade-long slump (2016–2025)," Evolutionary and Institutional Economics Review, Springer, vol. 14(1), pages 79-99, June.
  • Handle: RePEc:spr:eaiere:v:14:y:2017:i:1:d:10.1007_s40844-017-0072-7
    DOI: 10.1007/s40844-017-0072-7
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    References listed on IDEAS

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    1. Sergei Maslov & Bertrand M. Roehner, 2003. "Does The Price Multiplier Effect Also Hold For Stocks?," International Journal of Modern Physics C (IJMPC), World Scientific Publishing Co. Pte. Ltd., vol. 14(10), pages 1439-1451.
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    3. Richmond, Peter, 2007. "A roof over your head; house price peaks in the UK and Ireland," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 375(1), pages 281-287.
    4. Bertrand M. Roehner, 2009. "Hidden Collective Factors in Speculative Trading," Springer Books, Springer, number 978-3-642-03048-2, July.
    5. Muhammad Al-Jasser & Muhammad Ahmed Banafe, 2005. "Foreign exchange intervention in Saudi Arabia," BIS Papers chapters, in: Bank for International Settlements (ed.), Foreign exchange market intervention in emerging markets: motives, techniques and implications, volume 24, pages 265-72, Bank for International Settlements.
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