Housing Price Hikes by Negative Real Interest Rate? A Differencing Model Test on the Housing Markets of Hong Kong and Macau

13 Pages Posted: 3 Jul 2014

See all articles by Edward Chung Yim Yiu

Edward Chung Yim Yiu

University of Auckland Business School

Date Written: July 2, 2014

Abstract

This paper aims to test the effect of real interest rate on housing return, by using the differencing model for eliminating the effects of other factors. Even though the relationship has been tested before, but it is hard to eliminate other factors when studying the effect of real interest rate on housing return, especially the supply factor and the trading volume factor. This is the first attempt by using the differencing method to eliminate other factors to find the net effect of real interest rate on housing return, by using a two-city comparison, of Hong Kong and Macau from 2007Q1 to 2013Q4. The result shows that real interest rate imposes a negative effect on housing return, but not the housing supply, ceteris paribus.

Keywords: Real Interest Rate, Housing Price

JEL Classification: E40, R31

Suggested Citation

Yiu, Edward Chung Yim, Housing Price Hikes by Negative Real Interest Rate? A Differencing Model Test on the Housing Markets of Hong Kong and Macau (July 2, 2014). Available at SSRN: https://ssrn.com/abstract=2461600 or http://dx.doi.org/10.2139/ssrn.2461600

Edward Chung Yim Yiu (Contact Author)

University of Auckland Business School ( email )

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