Internal and External Determinants of Housing Price Booms in Hong Kong, China

26 Pages Posted: 16 Oct 2019

See all articles by Farhad Taghizadeh-Hesary

Farhad Taghizadeh-Hesary

Tokai University; Waseda University

Naoyuki Yoshino

Asian Development Bank Institute

Alvin Chiu

King's College London

Date Written: May 9, 2019


Hong Kong, China’s housing market witnessed dramatic appreciations recently, with the price index for private domestic housing units being 3 times higher than 10 years ago. This trend is supported by both internal and external factors. By providing a theoretical model and empirical analysis on the key variables influencing housing prices, we find that changes in housing price index reinforce price trends in the long term. Hong Kong, China’s dollar quantitative easing, and the gross domestic product of the People’s Republic of China (PRC) are positively related to housing prices and negatively to lending. The inability to increase supplies in response to rising demand since 2003 has also much to do with the skyrocketing prices. Moreover, mortgage-to-total loans value is shrinking due to the unaffordability of housing units at current prices. This trend has to be tackled in time, otherwise the PRC may incur severe consequences similar to Japan’s experience in the 1990s.

Keywords: housing bubble, housing prices, housing market, quantitative easing (QE), monetary policy

JEL Classification: R31, E51, E31

Suggested Citation

Taghizadeh-Hesary, Farhad and Yoshino, Naoyuki and Chiu, Alvin, Internal and External Determinants of Housing Price Booms in Hong Kong, China (May 9, 2019). ADBI Working Paper 948, May 2019. Available at SSRN: or

Farhad Taghizadeh-Hesary (Contact Author)

Tokai University ( email )

3-20-1 Orido
Shizuoka, 424-8610

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050

Naoyuki Yoshino

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008

Alvin Chiu

King's College London ( email )

London, England WC2R 2LS
United Kingdom

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