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Income elasticity of housing consumption in Hong Kong: a cointegration approach

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  • Raymond Y. C. Tse
  • John Raftery

Abstract

Income elasticity of housing expenditure is of considerable interest particularly to applied researchers in housing economics. However, there is a wide variation in the estimation of income elasticity. Such a variation is attributed to different specifications of estimation. This paper applies techniques developed in the literature of cointegration analysis to re-examine the income elasticity of housing consumption based on a long-run equilibrium model fitted with time-series data. Tests for unit roots are conducted to avoid spurious results in the estimation of the model. The use of the timeseries data generates some attractive properties. The results show that the short-run income elasticity is generally less than unity and the adjustment parameter is about 0.8. These results can be used to estimate the value of income elasticity of public and private housing residents, and of owners and renters separately.

Suggested Citation

  • Raymond Y. C. Tse & John Raftery, 1999. "Income elasticity of housing consumption in Hong Kong: a cointegration approach," Journal of Property Research, Taylor & Francis Journals, vol. 16(2), pages 123-138, January.
    • Handle: RePEc:taf:jpropr:v:16:y:1999:i:2:p:123-138
    DOI: 10.1080/095999199368184
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    1. John F. Kain & John M. Quigley, 1975. "Introduction to "Housing Markets and Racial Discrimination: A Microeconomic Analysis"," NBER Chapters, in: Housing Markets and Racial Discrimination: A Microeconomic Analysis, pages 1-8, National Bureau of Economic Research, Inc.
    2. Friedman, Joseph H. & Weinberg, Daniel H., 1982. "The Economics of Housing Vouchers," Elsevier Monographs, Elsevier, edition 1, number 9780122683602.
    3. John F. Kain & John M. Quigley, 1975. "Housing Markets and Racial Discrimination: A Microeconomic Analysis," NBER Books, National Bureau of Economic Research, Inc, number kain75-1.
    4. Deaton,Angus & Muellbauer,John, 1980. "Economics and Consumer Behavior," Cambridge Books, Cambridge University Press, number 9780521296762, October.
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    Cited by:

    1. Chang, Zheng, 2017. "Non-local Students, Housing Demand and Rental Impact: Evidence from Mainland Students in Hong Kong," International Real Estate Review, Global Social Science Institute, vol. 20(4), pages 525-548.
    2. Gary John Rangel & Jason Wei Jian Ng, 2017. "Macroeconomic Drivers of Singapore Private Residential Prices: A Markov-Switching Approach," Capital Markets Review, Malaysian Finance Association, vol. 25(2), pages 15-31.
    3. Tabuchi, Takatoshi, 2019. "Do the rich and poor colocate in large cities?," Journal of Urban Economics, Elsevier, vol. 113(C).
    4. Arif Igdeli, 2020. "A Spatial Econometric Analysis on the Determinants of Regional Housing Demand," Bingol University Journal of Economics and Administrative Sciences, Bingol University, Faculty of Economics and Administrative Sciences, vol. 4(2), pages 145-165, December.
    5. TABUCHI Takatoshi, 2018. "Where Do the Rich Live in a Big City?," Discussion papers 18020, Research Institute of Economy, Trade and Industry (RIETI).

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