影響香港物業價格的長期及短期因素 - English Article by HKMA

影響香港物業價格的長期及短期因素 (HKMA) (20 October 2008)

EXECUTIVE SUMMARY - Property prices in Hong Kong increased markedly in late 2007 and early 2008,raising concerns about the risk of overheating in the property market. Negative real interest rates were often cited as the main reason for the upsurge in property prices, and there were worries that they encouraged speculative activities. Our empirical analysis, however, suggests that the rise in property prices was largely underpinned by stronger economic fundamentals, and therewere no major signs of overheating in the property market.

- Using reduced-form demand-supply equations, co-integration analysissuggests that the long-run equilibrium real property price in Hong Kong is determined by real per-capita income, real interest rate, land supply and the residential investment deflator, which reflects the impact of inflation and real construction cost. In the short-run, property price is also affected by equity prices.

- A breakdown by the contribution of different determinants shows that the rebound in the real property price from late 2003 to early 2008 was supported by steady growth in household income and increases residential investment deflator. Negative real interest rates were found to have played a relatively small role in explaining the upsurge in real property prices since 2005.

- The actual real property price is found to be somewhat above its estimated long-run equilibrium value in late 2007, but the deviation from the long-run equilibrium value is relatively small compared to previous episodes of property market booms. The short-run model suggests that the overshooting in house prices could be due to spill-over effect from the stock market rally in 2007. As domestic equity prices have declined considerably since late 2007 and house prices have levelled off recently, the risk of overheating in the property market will likely diminish for the remainder of 2008.

- Qualitative analysis of six property market indicators using a graphicalframework suggests few signs of overheating pressure in the property market in the first half of 2008. Statistical analysis of the six indicators using the clustering method also does not point to an overheated property market.