Critical transitions in housing markets

The housing market has always played a critical role in the country's economy and continues to be a crucial bellwether of the national economy. We have seen catastrophic damages caused by previous housing market crashes such as the Japanese Asset Price Bubble of the 1990s and the United States Subprime Mortgage Crisis, which led to Japan's Lost Decade and Global Financial Crisis respectively. While reviewing previous studies on early detection of housing bubbles, we often nd the term "housing bubbles" being widely used, with no universally accepted de nition for it. These studies also tend to gravitate towards indices or assume that house prices are lognormally distributed. Recently, Tay et al. has demonstrated that home price distributions in Singapore and Taiwan deviate from their equilibrium distributions when approaching a bubble. Even though he found unusual features in the housing market that might account for the housing bubble, his work primarily focuses on the two housing markets, and there is not much research conducted by others to discover these same features in other housing markets. In our pursuit to provide stronger evidence of such universalities in the housing market, we extend this work by studying the home price distribution in the Hong Kong housing market from 1992 to 2010. With this, we hope that we can provide a deeper understanding of the nature and reasons for the emergence and evolution of housing bubbles in the Hong Kong housing market.Bachelor of Science in Physic