Abstract
This paper builds a house prices forecasting model for private residential houses in HongKong, based on general macroeconomic indicators, housing related data and demographicfactors for the period of 1980 to 2001. A reduce form economic model has been derivedfrom a multiple regression analysis where three sets and eight models were derived foranalysis and comparison. It is found that household income, land supply, population andmovements in the Hang Seng Index play an important role in explaining house pricemovements in Hong Kong. In addition, political events, as identified, cannot be ignored.However, the results of the models are unstable. It is suggested that the OLS may nota best method for house prices model in Hong Kong situation. Alternative methods aresuggested.
Highlights
The purpose of building a house prices forecasting model is to estimate the impact of housing demand and housing supply in Hong Kong
The objective of this study is to develop a house prices forecasting model for Hong Kong
The advantage of the least-squares method is that it expresses the secular trend in a mathematical formula which permits objective extrapolation into the past, present and future
Summary
The purpose of building a house prices forecasting model is to estimate the impact of housing demand and housing supply in Hong Kong. The property market plays a very important role in the economy of Hong Kong. The real estate sector contributed approximately 10.2 per cent of GDP in 1996 (Hong Kong Government, 1998). More than 45 per cent of all bank loans, over HK$500 billion as at the end of 1997, were directly tied to properties (Hong Kong Government, 1998). Smooth changes in house prices help to maintain stable economic growth in Hong Kong.
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