Why is the Hong Kong housing market unaffordable? Some stylized facts and estimations

Charles Leung, Joe Cho Yiu Ng () and Edward Chi Ho Tang

ISER Discussion Paper from Institute of Social and Economic Research, Osaka University

Abstract: The house price in Hong Kong is well-known to be "unaffordable." This paper argues that the commonly used house price-to-income ratio may be misleading in an economy with almost half of the population living in either public rental housing or subsidized ownership. Moreover, we re-focus on the relationships between economic fundamentals and the housing market of Hong Kong. While the aggregate GDP, population, longevity continues to grow, the real wage and household income fall behind. The trend component of the real GDP growth suffers a permanent downward shift after the first quarter of 1989 (a “political scar”). The trend component of real wage growth is close to zero, and the counterpart of real consumption and real investment decline steadily. Meanwhile, the trend component of the real housing rent and price display patterns that decouple from the macroeconomic variables. We also discuss the directions for future research.

Date: 2020-03
New Economics Papers: this item is included in nep-mac and nep-ure
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Citations: View citations in EconPapers (6)

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Working Paper: Why is the Hong Kong Housing Market Unaffordable? Some Stylized Facts and Estimations (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:dpr:wpaper:1081

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