Comparing Two Financial Crises: The Case of Hong Kong Real Estate Markets

Abstract

Hong Kong is no stranger to bubbles or crisis. During the Asian Financial Crisis (AFC), the Hong Kong housing price index drops more than 50% in less than a year. The same market then experiences the Internet Bubble, the SARS attack, and recently the Global Financial Crisis (GFC). This paper attempts to provide some "stylized facts" of the real estate markets and the macroeconomy, and follow the event-study methodology to examine whether the markets behave differently in the AFC and GFC, and discuss the possible linkage to the change in government policies ("learning effect") and the flow of Chinese consumers and investors to Hong Kong ("China factor"). JEL classification Number: E44, E50, E60, G01, R20Keywords: regime switching, structural change, small open economy, bounded rationality, banking policy  The authors are grateful to (alphabetical order) Ashok Bardhan, Nan-Kuang Chen, Bob Edelstein, Cynthia Kroll, Fred Kwan, Francois Ortalo-Magne, Matthew Yiu, and many seminar participants for many inspiring discussions over the years. The financial support from the City University of Hong Kong is gratefully acknowledged. The usual disclaimer applies. 2

Tax-Driven Bunching of Housing Market Transactions: The Case of Hong Kong

“…Whether or not D2 was present at the offices of New World on the 7th January 2005 does not in any way reduce his culpability. 17. Taking into account all the circumstances together with the good character of the defendants I am satisfied the proper starting point after trial is eighteen months imprisonment.…”

“…17 Assuming that the hedonic regression is adequate, the residual should tell us if a property is overpriced or underpriced relative to the hedonic price. For instance, if a property is underpriced at or right below a cutoff price, the residual should be substantially more negative than it would otherwise be.…”

“…We are, however, grateful for the suggestion. 17 The sample is too small if we only consider housing units that are exactly at the cutoff points. We also used $0.01 and $0.05 million below the cutoff points for estimation, and found that the results were similar.…”

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