House price overvaluation in Hong Kong: identifying the market fundamentals and understanding the ‘bubble’
International Journal of Housing Markets and Analysis
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Arestis, P. (2017). House price overvaluation in Hong Kong: identifying the market fundamentals and understanding the ‘bubble’. International Journal of Housing Markets and Analysis, 10 282-304. https://doi.org/10.1108/IJHMA-01-2016-0003
Purpose The purpose of this paper is twofold. First, we investigate the main drivers of house prices in the Hong Kong housing market. Second, further research is undertaken to confirm the existence of a house price overvaluation, which has driven the market into a bubble episode. Design/methodology/approach Firstly, we propose a theoretical framework to identify the fundamentals of the market. In the second step, we 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 Our results suggest an eventual possible correction of up to 46% of house prices with respect to their 2013(Q3) level. Originality/value The originality of this paper is to employ the procedure developed by Glindro and Delloro (2010) to analyse the Hong Kong housing market. Our contribution also modifies the original Glindro and Delloro’s (2010) approach by including the Christiano and Fitzgerald (2003) filter to decompose house prices.
house prices, Hong Kong, structural breaks, housing bubble
External DOI: https://doi.org/10.1108/IJHMA-01-2016-0003
This record's URL: https://www.repository.cam.ac.uk/handle/1810/256532