Factors associated with the recovery of housing prices in Hong Kong

In the period 1999 – 2004 housing prices in Hong Kong sunk to a low point in mid 2003 and then rose again. This paper investigates which factors are associated with those price movements. The paper starts by reviewing literature on housing prices including both price determinants and research methodology. Data published by the Hong Kong Government is used for the study. The housing price variables are grouped together as macro economic factors, demographic factors, housing related factors and housing supply factors. The 2-Stage Least Square (2SLS) Method of regression analysis is used in order to reduce the bi-direction effects between dependent and independent variables. Results show that economic conditions are the most important external influencers of housing prices. The model developed can be used to predict the trend of housing prices