Our empirical results reveal several positive bubbles in the hong kong residential property market, including one in 1995, a stronger one in 1997, yet another one in 2004, and a more recent one in 2008. The hong kong housing problem management study guide. Soaring property prices in the past few years have given hong kong the title of most unaffordable housing in the world for the fourth straight year, according to a survey of 360 cities by usbased. Ubs global real estate bubble index 2018 ubs global topics. On december 30, 2008, the caseshiller home price index reported its largest price drop in its history. Latest hong kong property market news, including property outlook and hong kong real estate news. The hong kong property bubble that wont burst financial. Negative real interest rate and housing bubble implosion an. Chinas debt disease is infecting its housing market quartz. Hong kong remains the worlds most overvalued housing market and is at the greatest risk of a property bubble, according to ubs global wealth management on thursday. The underlying causes of the housing problems especially high real housing prices in asia, and the recommended longterm solution. Ling joephy fung abstract ever after its return to china in 1997, hong kong remains one of the most sophisticated free markets in the entire country. Jun 24, 2018 why china cant fix its housing bubble. Just homes were sold in the first three weekends after chinese new year at the citys 10 largest housing estates, according to centaline property agency ltd data.
Hk coronavirushit property market grinds to a halt hong. Hong kong s residential skyscrapers minghong wikimedia commons hong kong s housing shortage and tiny flats are notorious problems in a city that is known for the stark contrast between its extraordinary wealth and the poor living conditions of a large section of its population. This paper investigates a potential housing bubble in hong kong in the 1990s. So it seems that the developers were right in saying that the demand for housing by prospective homebuyers in hong kong is inelastic. The housing market channel of the monetary transmission mechanism in hong kong hong kong monetary authority abstract this paper examines the roles that the property market plays in the transmission of interest rate movements to output growth and inflation in hong kong.
Hong kong s housing market was seriously affected by the global financial crisis, but after falling 17% 18% in real terms from june to december 2008, hong kong s residential price index rebounded and rose by 20%. The unit of observation is a housing complex, locally called a housing estate, consisting of an average of 370 almost identical units. In this current piece, id like to take a quick look at one of the bubbles i warned about in my june 2019 piece u. Housing bubble toil and trouble in hong kong, chile. Hong kong economic report h1 2019 4 census and statistics department. As protests continue to roil hong kong, a widely followed economist has an idea about how to ease tensions. Hong kong housing problem from the 1950s to the present. His research interests include broad areas of urban regional studies, economic development and spatial transformation, and geography of trade and finance. Hong kong has been ranked as the most expensive city to live in. Sep 28, 2018 hong kong remains the worlds most overvalued housing market and is at the greatest risk of a property bubble, according to ubs global wealth management on thursday.
Nowadays, hong kong is facing the downturn of world economy and the bad debt problems in europe which will weaken the peoples confidence on the housing market. In hong kong, the relationship between the property market and the wider economy is of particular significance for a number of reasons. Hong kong housing database, prh, tps, hos, psps, private. Nov 06, 2009 the purpose of this paper to identify the asymmetric effect of real interest rate on housing return. Stripping out rural settlement housing only 7% of the citys total domestic households, the remainder of the population is effectively squeezed into an area of 42 km 2 16 sq mi. How big is chinas real estate bubble and why hasnt it burst. Asia times housing bubble toil and trouble in hong kong. Second, further research is undertaken to confirm the existence of house price overvaluation, which has driven the market into a bubble episode. Demographia international housing affordability survey. In the 2019 affordability survey covering 90 cities of more than one million people, pir values range from 2.
Hong kong, worlds most overvalued housing market, is at. Major imbalances are also found in 10 other locations including stockholm, paris, san francisco, frankfurt, and sydney. The high likelihood of an eventual bursting of the gigantic property bubbles in hong kong, india or another asian economy, which would in turn trigger another asian financial crisis. Jan 10, 2020 the fact is that hong kongs real estate market has been relatively resilient compared with other sectors, such as tourism and the retail business. Something outside the norm, like demand, speculation, or overzealous investing, drives house prices up until they can no longer be supported.
A test case in hong kong, between 1990 and 2003, is included to test the reliability of our methods because hong kong has experienced the formation and bursting of a huge housing bubble around the year 1997. Detecting bubbles in hong kong residential property market. This has led to governments in a number of places taking action to cool the housing market. Home hong kong housing authority and housing department. Get alerts on property sector when a new story is published get alerts.
If hong kong isnt a housing bubble, then nothing is. March, 2005 preliminary please do not cite or quote. Hong kong house price index 19942020 data 20212022. The hong kong residential housing market index centacity index experienced a real increase of 50 percent from 1995 to 1997, followed by a real decrease. The hong kong housing authority ha administers hong kongs public housing programme with the support of its executive arm, the housing department hd. On an average, the median income to housing price ratio is more than 18. Hong kong s housing bubble looks like it will live on to burst another day. Despite attempts by the government to curb hong kong s housing market, prices continued to climb this year as demand outpaced supply. The theory is that home prices are already up substantially from where they were at the prior peak during the bubble, so maybe those bubble prices were not that high after all. The wharton school, university of pennsylvania, 18 may, 2005.
Hong kong, despite these price increases, is by far the most attractive real estate market in. Frankfurt and paris are new additions to the bubble risk zone. With respect to hong kong reals estate market, peng 2002 used this method to detect the 1997 bubble in the residential property market. With chinas economic boom and capital surplus in recent decades, chinese. Hong kongs worsening housing shortage forces thousands into. Further evidence qiao yu hanwen fan xun wu abstract. Arshanapalli and nelson 2008 employ the cointegration test to identify the housing bubble in the mid2000s in the us housing market. Burst of the property bubble and hong kong s changing land and housing policies post1997 article pdf available in eurasian geography and economics 572. Hong kong has the worlds most overvalued property market and faces the greatest risk of a housing bubble according to a new report of.
Bubble burst unlikely in hks resilient property market. Hong kong sar and southern china revisiting the residential. Hong kongs worsening housing shortage forces thousands. Hong kongs usually booming property market has virtually ground to a halt as the fear of coronavirus impacts life in the city. I now have the pleasure to get hold of a few research reports of the hong kong. A withincity analysis is performed using a monthly panel data set on 324 largescale housing complexes estates located in 17 out of 18 districts in hong kong. These 7 cities are most at risk of a realestate bubble. But now a bizarre idea is making the rounds that, looking back on it, maybe there wasnt a housing bubble at all.
First, the property market plays an important role in the hong kong economy. Should mainland investors be blamed for causing hong kongs. Forbes takes privacy seriously and is committed to transparency. Bubble risks shift towards the eurozone the greatest risk of a real estate bubble currently exists in munich, followed by toronto, hong kong and amsterdam.
Keeping housing prices buoyant and development robust is thus an overriding imperative for china one that is distorting policymaking and worsening. Eighteen people are dead in riots in santiago, the oncehalcyon capital of chile, a beautiful city long favored as an expat retirement haven. John tsang, the hong kong financial secretary warned that the price of secondhand flats on hong kong island hit record levels, surpassing the peak reached during the 1997 housing bubble. This page provides hong kong house price index actual values, historical data, forecast, chart, statistics, economic calendar and news. The ubs global real estate bubble index is designed to track the risk of housing bubbles in global financial centers. Global saving glut, monetary policy, and housing bubble. The cost of housing has soared well past the reach of ordinary folk in both cities. In the meantime, you can learn more about this bubble in our emerging markets bubble report. Nov 29, 2006 a test case in hong kong, between 1990 and 2003, is included to test the reliability of our methods because hong kong has experienced the formation and bursting of a huge housing bubble around the year 1997.
A housing bubble describes a period in the real estate industry when house prices grow to aboveaverage. Housing is the most important form of savings for many households. Hong kong has asias largest wealth gap, with the 10 richest individuals. The united states housing bubble was a real estate bubble affecting over half of the u. This approach is made possible by the compilation of a unique, monthly panel data set of the hong kong housing market from 1992 to 1998. Real estate indicators in hong kong sar kelvin fan and wensheng peng1 abstract this paper provides an overview of available real estate indicators in hong kong sar that may be used for monitoring the vulnerabilities of the banking sector and the economy to fluctuations in property prices. But they also recognize that affordability has its limit, which is defined by the availability of easy credit. Six global cities are considered bubble risk while a further. In london, by contrast, the bubble risk has fallen after further price corrections, as a result of which the city is now only. The housing market channel of the monetary transmission. This study uses a newly developed bubble detection method phillips, shi, and yu, 2011 to identify real estate bubbles in the hong kong residential property market. Jun 11, 2019 indeed, in 2016, the head of chinas central bank and the allpowerful state council pdf. Survey after survey has found that the housing prices in hong kong are simply unaffordable. Simon xiaobin zhao is founding director of international centre for china development studies, and associate professor of the department of geography, the university of hong kong.
Hong kong ranks worlds no 1 for most unaffordable housing. First, the authors investigate the main drivers of house prices in the hong kong housing market. Hong kong a new type of extremely small apartment could be a glimpse into the future of life in hong kong, as the territorys housing shortage grows more acute and prices soar. Recently, a heated debate has emerged in the economic literature, focusing on the. Its housing market is yet another example of the countrys eerie, and widely envied, immunity to. At these levels, if hong kong is not a housing bubble, then nothing is. From the global financial tsunami to the property bubbles in asia. Housing prices peaked in early 2006, started to decline in 2006 and 2007, and reached new lows in 2012. The bursting of the hong kong property bubble is not looking as farfetched as many. The prices will just keep dropping, but there will be no cataclysmic event. Should mainland investors be blamed for causing hong kongs housing bubble. Mar 03, 2019 the bubble risk appears greatest in six global cities with hong kong the most vulnerable, followed by munich, toronto, vancouver, amsterdam, and london according to the ubs global real estate bubble index 2018.
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