Abstract
This paper tests empirically the relationship between real interest rate and housing return in Hong Kong. The time series date from the first quarter of 1984 to the first quarter of 2009. Employing multiple regression analysis with autoregressive and lagged independent variables, it shows that housing bubble implosions could be largely explained by the negative real interest rate. Furthermore, it shows an asymmetric effect of real interest rate on housing return. It can be a good predictor for housing bubbles in the future.
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