Housing inflation in Hong Kong

By

ACKNOWLEDGEMENT

I would take this opportunity to thank my research supervisor, family and friends for their support and guidance without which this research would not have been possible.

DECLARATION

I, [type your full first names and surname here], declare that the contents of this dissertation/thesis represent my own unaided work, and that the dissertation/thesis has not previously been submitted for academic examination towards any qualification. Furthermore, it represents my own opinions and not necessarily those of the University.

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ABSTRACT

In this study we try to explore the concept of “Housing inflation in Hong Kong” in a holistic context. The main focus of the research is on “Housing inflation in Hong Kong” and its relation with “economic progression of the country”. The research also analyzes many aspects of “Housing inflation in Hong Kong” and tries to gauge its effect on “the overall development and rapid expansion of all sectors”. Finally the research describes various factors which are responsible for “Housing inflation in Hong Kong” and tries to describe the overall effect of “inflationary attempts” on “the entire representation and running of the country”.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 01: INTRODUCTION1

Introduction1

Background of the Research1

Research Question2

Significance of the Research2

Limitations of the Study3

Research Aim4

CHAPTER 02: LITERATURE REVIEW5

Hong Kong Inflation: No slowdown here8

Luxury residential11

Tenant Demand11

Leasing Demand13

CHAPTER 03: METHODOLOGY15

Combination of Research methods15

Research design16

Data collection tools and methods16

Conference Calls meeting17

Email Contacts with Questionnaires18

Secondary Data Collection Methods19

Data analysis19

Research Limitations20

Keywords22

Ethical Concerns22

CHAPTER 04: DISCUSSION AND ANALYSIS24

CHAPTER 05: CONCLUSION26

REFERENCES27

CHAPTER 01: INTRODUCTION

Introduction

The negative relationship between real interest rate and housing return has long been established theoretically since Fisher (1930). However, there have been very few studies on negative real interest rate, let alone its effects on housing bubble implosion. The reason why there are so few empirical studies is probably because negative real interest rate is very rare in any parts of the world at any time of the history.

Background of the Research

Theoretically, negative real interest rate is considered abnormal, as it renders Gordon growth model and Campbell and Shiller's (1988) dividend-ratio model inoperable. In general, monetary policy is to smooth economic fluctuations, thus it often results in a general converging trend between nominal interest rate and inflation rate. However, under the currency board (linked exchange rate at US$1=HK$7.8) system implemented in Hong Kong since October 1983, nominal interest rates in Hong Kong are exogenously determined by the US interest rates. As a consequence, unlike most of the other economies, negative real interest rates have been commonly found in Hong Kong in the past 25 years. Probably, it is the only city which has such a high proportion of negative real interest rate period, and encountered two large-scale housing bubble implosions within a 10-year horizon. It therefore enables the first empirical study on the impact of negative interest rate on housing return (Aggarwal, 1981, 75).

Yet, if that is the case, then this study would be very limited in its implications, and of no generalized insights for global markets. However, with the prevalence of fiat money and bank money in recent decades, together with ...