Government Land Supply and Housing Prices in Hong Kong: The Political Economy of Urban Land Policy

Li, L. H., Wong, S. K. K., & Cheung, K. S. (2016). Land supply and housing prices in Hong Kong: The political economy of urban land policy. Environment and Planning C: Government and Policy, 34(5), 981-998.

20 Pages Posted: 10 Mar 2021

See all articles by Ling-Hin Li

Ling-Hin Li

The University of Hong Kong

Siu Kei Wong

University of Hong Kong

William Ka Shing Cheung

University of Auckland Business School

Date Written: 2016

Abstract

With the government owning all land in Hong Kong, public land sales have been an important channel for developers to acquire land for property development, apart from private-led urban regeneration. For the colonial time before 1997, land was supplied to the market via a supply-oriented model, in which the government determined how much land to sell and when. The situation changed in 1997 when the administration found that they were being unresponsive to market conditions, and switched to a demand-oriented model that allowed developers to reveal their demand for land. In any case, there is a general expectation in the society that government urban land policy in supplying land plays a pivotal role in making housing affordable by the general working class. By applying a modified Granger Causality test, we find this expectation unrealistic as there is no evidence supporting the claim that changing the quantity of land supply via government land sales would impact housing prices, even when the demand-oriented model was used. This suggests that changing the model per se did not solve the affordability problem. Further analysis based on other sources of land supply reveals that land sales are too trivial to have any observable impact on the housing market. Yet, the political economy of the urban land market prohibits the government from selling more land to build housing, as most of the land she owns has no or restricted development rights.

Keywords: Land Supply, Granger causality test

Suggested Citation

Li, Ling-Hin and Wong, Siu Kei and Cheung, William Ka Shing, Government Land Supply and Housing Prices in Hong Kong: The Political Economy of Urban Land Policy (2016). Li, L. H., Wong, S. K. K., & Cheung, K. S. (2016). Land supply and housing prices in Hong Kong: The political economy of urban land policy. Environment and Planning C: Government and Policy, 34(5), 981-998., Available at SSRN: https://ssrn.com/abstract=3767204 or http://dx.doi.org/10.2139/ssrn.3767204

Ling-Hin Li

The University of Hong Kong ( email )

Pokfulam Road
Hong Kong, Pokfulam HK
China

Siu Kei Wong

University of Hong Kong ( email )

Pokfulam Road
Hong Kong, HK
China

William Ka Shing Cheung (Contact Author)

University of Auckland Business School ( email )

12 Grafton Rd
Private Bag 92019
Auckland, 1010
New Zealand

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