The Impact of Supply of Subsidized Sale Flats on Private Housing Prices in Hong Kong

Abstract

This paper investigates the impact of supply of subsidized sale flats on private housing prices in Hong Kong, and their cause-and-effect relationships. Using quarterly data for 1978-2003, the results show that private property prices move independently of the supply of subsidized sale flats and that such supply does not “Granger cause” private housing prices. The study also found evidence that the cessation has not restored the market or resulted in any increase in housing prices. The demand or prices in the private sector is not influenced by the implementation of the moratorium nor does the production and sale of subsidized sale flats pose a direct threat to the private sector in Hong Kong. Finally, the regression analysis shows that the stock of private domestic accommodation, transaction volume of private residential flats, household income, and unemployment rate are important in explaining property market behavior.