THE IMMINENT HOUSING COLLAPSE - WILL HISTORY REPEAT ITSELF?

• Main Authors: Ping-fu (Brian) LAI, Ho Sum CHAN
• Format: Article
• Language: English
• Published: “Victor Slăvescu” Centre for Financial and Monetary Research 2014-12-01
• Series: Financial Studies
• Subjects: Housing; Property; Bubble; Resident; Hong Kong
• Online Access: http://fs.icfm.ro/vol18i4p63-104.pdf

Human being is not particularly good at learning from history. Either we haven't lived long enough to live through every moment of it, or we just forget what we have lived through. Today, many analysts' cranky critiques are still very bullish, and are trying hard to explain intuitively why Hong Kong property prices can't drop, and how much healthier the market is. However, a remarkably stagnant property market in terms of transaction volume, even though prices are still holding up for the time being, is far more sceptical about markets' inherent rationality. There is very little doubt that home prices are among the most expensive on earth; Demographic trend is working against the market; Economic uncertainties of U.S fiscal cliff increase; Mainland China slowdown curbs Hong Kong growth; Interest rates on the only way up; Government's moves to check speculation and the Illusion of supply shortage etc. This is the prerequisite to call anything a "bubble", and the property market in certainly meets these criteria. The purpose of this paper is to use an econometric model and descriptive statistical analysis to illustrate Hong Kong resident property prices correction is imminent today.