Causality in Real Estate Markets: The Case of Hong Kong

Ling He and James Webb

Journal of Real Estate Portfolio Management, 2000, vol. 6, issue 3, 259-271

Abstract: Executive Summary. This study examines the causal price/rental relationships between the residential and the commercial real estate markets (office buildings, retail stores and industrial properties) in Hong Kong. Contemporaneous causalities between residential and the three types of commercial properties are found. The results indicate that the residential and commercial real estate markets have similar responses to some important economic and political news.In contrast to the common view that large transactions of commercial properties are usually leading indicators of change in real estate markets, evidence about the unidirectional causality from residential prices/rentals to commercial prices/rentals suggests that the higher frequency of price/rental adjustments for residential real estate provides more opportunities to reflect the impact of significant news. However, no unidirectional causality between residential rentals and industrial rentals is found. This may reflect fundamental differences in lease terms.

Date: 2000
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DOI: 10.1080/10835547.2000.12089614

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