A Tale of Two Cities: Mainland Chinese Buyers in the Hong Kong Housing Market

63 Pages Posted: 8 Nov 2019 Last revised: 22 Dec 2022

See all articles by Yi Fan

Yi Fan

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN)

Maggie R. Hu

Zicklin School of Business, Baruch College - The City University of New York

Wayne Xinwei Wan

Monash University - Department of Banking and Finance

Zhenping Wang

State of Wisconsin Investment Board

Date Written: December 21, 2022

Abstract

This paper examines the impact of mainland Chinese buyers in the Hong Kong housing market,
using complete transaction records between 2001 and 2017. We find that mainland buyers pay an
average price premium of 1.4% compared with locals. The premiums are estimated to be 3.5% for
large-sized luxury units and 1.6% for homes in central locations. The mechanisms that underlie the
price premiums include a hedging effect, residential sorting, and information barriers, of which the
hedging motive has the strongest impact. Mainland buyers’ price premiums rise significantly when
the Chinese currency depreciates or China’s economic policy uncertainty increases. Our study
sheds light on the impact and mechanism of the “China shock” on the global housing markets.

Keywords: Hong Kong housing market, price premiums, mainland buyers, hedging effect, residential sorting, information barriers

JEL Classification: R23, O18, F22

Suggested Citation

Fan, Yi and Hu, Maggie and Wan, Wayne Xinwei and Wang, Zhenping, A Tale of Two Cities: Mainland Chinese Buyers in the Hong Kong Housing Market (December 21, 2022). Available at SSRN: https://ssrn.com/abstract=3477421 or http://dx.doi.org/10.2139/ssrn.3477421

Yi Fan

National University of Singapore (NUS) - Sustainable & Green Finance Institute (SGFIN) ( email )

Singapore

Maggie Hu (Contact Author)

Zicklin School of Business, Baruch College - The City University of New York ( email )

55 Lexington Ave., Box B13-260
New York, NY 10010
United States

Wayne Xinwei Wan

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

HOME PAGE: http://xinweiwan.weebly.com/

Zhenping Wang

State of Wisconsin Investment Board ( email )

121 E Wilson St
Madison, WI 53703
United States

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