The effects of macroprudential policies on housing market risks: evidence from Hong Kong

Dong He

Financial Stability Review, 2014, issue 18, 105-120

Abstract: This paper describes the framework and conduct of macroprudential policies regarding housing market risks in Hong Kong, and attempts to shed light on the question whether policy instruments such as caps on loan to value (LTV) ratios should be aimed at targeting household leverage, credit growth or property prices. The results of empirical work suggest that caps on LTV ratios have been effective in constraining household leverage, but do not appear to have sustained effects on housing prices. The effect on loan growth is likely to be state-dependent, being more effective when there is excess credit demand but less so when there is excess credit supply. In comparison, higher transaction taxes in the form of additional stamp duties levied by the Government appear to be effective in constraining housing demand and restraining housing price growth.

Date: 2014
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