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Real Estate Market Analysis Spring V15jan2019 PDF
Real Estate Market Analysis Spring V15jan2019 PDF
k s tse 1
Demonstrator
gtsangwk@hku.hk
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Contents
k s tse 3
Introduction
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Hong Kong Stock Market
Industry Classification
• Energy • Utilities
• Materials • Financials
• Industrials • Properties & Construction
• Consumer Goods • Information Technology
• Consumer Services • Conglomerates
• Telecommunications
HKEX Fact Book
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Market Capitalization Trend by
Hang Seng Industry Classification 2006-2015
Industry Class 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Energy 6.1% 7.4% 6.9% 7.3% 8.1% 7.8% 7.6% 6.2% 4.7% 3.5%
Materials 2.2% 2.9% 1.8% 3.0% 3.3% 2.6% 2.5% 2.0% 2.1% 1.8%
Industrials 1.0% 1.6% 1.3% 1.5% 2.2% 1.6% 1.8% 3.6% 4.2% 4.7%
Cons Goods 5.9% 6.8% 6.5% 9.3% 10.6% 11.5% 10.9% 11.7% 11.1% 11.4%
Cons Services 6.9% 7.2% 5.8% 6.7% 8.1% 9.2% 9.1% 10.6% 7.9% 6.3%
Telecom 13.8% 16.4% 18.3% 10.2% 9.3% 11.9% 10.5% 8.7% 9.4% 9.2%
Utilities 3.5% 3.0% 4.2% 3.6% 3.4% 4.3% 4.9% 5.4% 6.0% 6.0%
Financials 39.6% 31.2% 34.8% 34.5% 32.9% 30.5% 30.7% 29.0% 30.0% 29.4%
Properties 11.5% 14.2% 12.4% 13.9% 12.6% 11.6% 15.2% 13.5% 13.9% 14.4%
Info Tech 3.0% 3.2% 2.4% 4.7% 4.0% 3.7% 3.8% 6.0% 6.5% 8.6%
Conglomerates 6.4% 6.0% 5.5% 5.4% 5.6% 5.3% 3.1% 3.3% 4.2% 4.7%
Equity Total 100% 100% 100% 100% 100% 100% 100% 100% 100% 100%
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Market Capitalization Trend by Hang Seng
Industry Classification 2010-2013
Market Capitalization by Industry
1 Jan 2010 -- 31 Dec 2013
35% 30%
30%
25%
20%
15% 13%
11%
8% 9%
10% 6% 7%
4% 5%
5% 3% 3%
0%
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Market Capitalization Trend by
Hang Seng Industry Classification 2006-2015
45.0%
39.6%
40.0% 34.8% 34.5% 32.9%
35.0% 31.2% 30.5% 30.7% 30.0% 29.4%
29.0%
30.0%
25.0%
20.0% 15.2%
14.2% 12.4% 13.9% 12.6% 13.5% 13.9% 14.4%
15.0% 11.5% 11.6%
10.0%
5.0%
0.0%
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
20.0%
0.0%
-20.0%
SARS 2003 Special
-40.0% Ad valorem
Stamp Duty
Stamp Duty
(SSD)
-60.0% Recession 1997-2002 20Nov2010
(AVD)
5Nov2016
-80.0% Asia Financial Crisis 1997-1999 Global Financial Crisis 2008
-100.0%
May-02
May-07
Mar-08
Jul-01
Mar-03
Jul-06
Sep-00
Nov-94
Jan-04
Nov-04
Sep-05
Jan-94
Sep-95
May-97
Mar-98
Jan-99
Nov-99
Jan-09
Nov-09
May-12
Jul-16
Jul-96
Sep-10
Jul-11
Mar-13
Jan-14
Nov-14
Sep-15
R(HSI)-YoY R(Price)-YoY k s tse 10
Stock and Property Market Performance
50.0%
Property Price Change and GDP Growth (YoY%) 15.00%
40.0%
Quarterly Property Price Change yoy%
10.00%
20.0%
5.00%
10.0%
0.00%
0.0%
06Q1
01Q1
03Q3
02Q1
02Q3
03Q1
03Q3
04Q1
04Q3
05Q1
05Q3
06Q3
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
-10.0%
-5.00%
-20.0%
Quarterly GDP Change YoY% Small and Medium Sized Properties
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Consumer Price Index
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Consumer Price Index
Consumer Price Index (yoy %Change): 2000-2015
+15.0
All Food Housing Clothing and Footwear Transport
+10.0
+5.0
0.0
-5.0
-10.0
-15.0
2000 2002 2004 2006 2008 2010 2012 2014 2016
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Consumer Price Index
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Is Residential Real Estate Real
Examine the Return on Price and Rent versus Inflation Rate
15.00%
monthly return on Return on Price Return on Rent CPI (%)
residential property 10.00%
price and rent
5.00%
versus inflation rate.
0.00%
-5.00%
-10.00%
Does real estate
investment provide a -15.00%
good hedge against Feb-93 Jul-98 Jan-04 Jul-09 Dec-14
inflation ?
Return on Price Return on Rent CPI (%)
Monthly Average 0.50% 0.24% 0.19%
Monthly Stdev 2.59% 1.51% 0.37%
0.00%
-5.00%
-10.00%
Does real estate
-15.00%
investment provide a
good hedge against -20.00%
Feb-93 Jul-98 Jan-04 Jul-09 Dec-14
inflation ?
Return on Price Return on Rent CPI (%)
Monthly Average 0.50% 0.24% 0.19%
Monthly Stdev 2.59% 1.51% 0.37%
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Contents
• Introduction
• Stock Market, Property Market, GDP, Consumption.
•Characteristics of Hong Kong Economy
• Real Estate Market Activities and Bubbles
• Supply and Demand Conditions
• Affordability Issues
• Residential Price Performance
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Capital Inflows around the Financial Crisis
Monetary Base
1200
Hong Kong Monetary Authority (HK$ Billions)
1086 1090
1051
1011
1000
+506
800
600 +186
507
400 321
284 296
200
0
2005 2006 2007 2008 2009 2010 2011 2012
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Capital Inflows around the Financial Crisis
HK Monetary Base (HK$ billion)
Source: Hong Kong Monetary Authority
1800
1593 1636
1600
1400 1346
1219 1256
1200
1011 1040 1073
1000
800
600 507
321
400 247 293 295 284 296
200
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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Low Local Interest Rates
Sep-09 Oct-09 Nov-09 Dec-09 Jan-10 Feb-10 Mar-10
0.14 0.08 0.05 0.08 0.08 0.07 0.10
1-Month HIBOR (% p.a.)
8.00
7.00
6.00
5.00
4.00
3.00
2.00
1.00
0.00
Jan-99 May-00 Sep-01 Feb-03 Jun-04 Nov-05 Mar-07 Aug-08 Dec-09 Apr-11
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Low Local Interest Rates
9.00% Best Lending Rate p.a. 3-mo HIBOR
3-month LIBOR Fed Fund Target Rate
8.00%
7.00%
6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
07Q1
07Q2
07Q3
07Q4
08Q1
08Q2
08Q3
08Q4
09Q1
09Q3
09Q4
10Q1
10Q2
10Q3
10Q4
11Q1
11Q2
11Q3
11Q4
09Q2
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Fund Inflows and Potential Risks
• Causes of fund inflows
• Potential Risks
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Contents
• Introduction
• Stock Market, Property Market, GDP, Consumption.
• Characteristics of Hong Kong Economy
•Real Estate Market Activities and Bubbles
• Supply and Demand Conditions
• Affordability Issues
• Residential Price Performance
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Real Estate Market Activities
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Hong Kong Property Market during the
Global Financial Crisis
Real Estate Peak Trough Correction since Rebound from the
Indicators Date Date peaking trough (Feb 2010)
Luxury residential prices Jun 08 Dec 08 -33.3% +46.5%
Luxury residential rents Jul 08 Apr 09 -32.9% +22.4%
Mass residential prices Mar 08 Dec 08 -23.3% +37.4%
Mass residential rents Jul 08 Mar 09 -24.1% +27.3%
Grade-A office prices Feb 08 Feb 09 -48.2% +67.7%
Grade-A office rents May 08 Aug 09 -41.6% +11.1%
Retail prices Jun 08 Jan 09 -21.1% +39.6% (Jan)
Retail rents Jul 08 Apr 09 -9.4% +11.7% (Jan)
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Rental Yields of Properties
Year Mass Luxury Grade-A Retail Industrial
Residential Residential Office
Jul 4.8 3.5 4.6 4.9 7.2
2006 Dec 4.5 3.5 4.8 4.9 7.0
Jul 4.4 3.5 4.2 4.5 6.2
2007 Dec 4.1 3.1 3.7 4.3 5.8
Jul 4.3 3.4 4.2 4.2 5.6
2008 Dec 4.1 3.4 5.1 4.7 6.2
Jul 3.5 2.6 3.6 4.0 5.6
2009 Dec 3.6 2.7 3.4 3.8 5.2
2010 Jan 3.6 2.7 3.2 3.7 5.1
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Rental Yields of Properties
Mass Residential Luxury Residential Grade-A Office Retail Industrial
8.0
7.5
7.0
6.5
6.0
5.5
Rental Yields (%)
5.0
4.5
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
Jul-06 Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10
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Visitor Arrival Growth
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Mainland Visitors and Private Retail
Retail Rent, Price and Mainland Visitors
6 000 000 700
573.6
536.7 600
5 000 000
500
4 000 000 305.3
400
3 000 000
300
2 000 000
200
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Visitor Arrival Growth
• Correlation of yoy Change in monthly Retail Rent and Price
Index with yoy% Change in monthly Visitor by Region
(Jan 2011 to Mar 2017)
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Hong Kong Property Market Rental Yields
Yield % Residential Class A Residential Class E
Office A Flatted factories
16
10-Yr Exchange Fund Notes
14 Hong Kong Monetary Base (HKD billion)
2005 2006 2007 2008 2009
12 284 296 321 507 1011
10
0
Jan-99 Feb-00 Mar-01 Apr-02 May-03 Jun-04 Jul-05 Sep-06 Oct-07 Nov-08 Dec-09
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Deals over HKD 100M (2006-2009)
Residential Office Retail Industrial Hotel
Total Total Total Total Total
No. of Value No. of Value No. of Value No. of Value No. of Value
Year
Deals (HKD Deals (HKD Deals (HKD Deals (HKD Deals (HKD
Bn) Bn) Bn) Bn) Bn)
2006 49 10.22 55 24.20 16 6.73 21 6.72 3 0.77
2007 102 25.06 56 13.17 27 7.48 29 7.72 4 1.55
2008 119 36.73 68 18.23 40 7.34 16 4.62 3 0.75
2009 61 15.71 43 10.61 46 11.47 19 4.88 1 0.15
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Hong Kong Monetary Base (HKD billion)
Transaction Volume 2005 2006 2007 2008 2009
284 296 321 507 1011
12000
10000 Primary Sales
8000 Secondary Sales
6000
4000
2000
0
10.00%
GDP Growth
5.00%
0.00%
-5.00%
-10.00%
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Hong Kong Monetary Base (HKD billion)
Transaction Volume 2005 2006 2007 2008 2009
284 296 321 507 1011
40000
Primary Sales
30000 Secondary Sales
20000
10000
10.00%
GDP Growth
5.00%
0.00%
-5.00%
-10.00%
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Vacancy Rate and GDP Growth
25.0% 25.0%
20.0% 20.0%
15.0% 15.0%
10.0% 10.0%
5.0% 5.0%
0.0% 0.0%
-5.0% -5.0%
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
%GDPGrowth Vacancy A Vacancy C Vacancy E
k s tse 37
Vacancy Rate and GDP Growth
%𝑉𝑅 = 𝛽0 + 𝛽1 %𝐺𝐷𝑃𝐺𝑅 + 𝜀
Regression Results Class A Class C Class E
0.0332 0.0752 0.1013
𝛽0
(18.95) (19.02) (13.12)
-0.0533 -0.1690 -0.2338
𝛽1
(-3.03) (-4.28) (-3.03)
25.0% 25.0%
20.0% 20.0%
15.0% 15.0%
10.0% 10.0%
5.0% 5.0%
0.0% 0.0%
-5.0% -5.0%
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017
%GDPGrowth Vacancyk sAtse Vacancy C Vacancy E 38
Price and Rental Index Trend
Residential property prices and rents have returned to pre-crisis levels (with prices
and rents even approaching to more than 80% of the 1997 level).
200.0
1997 Levels
180.0
160.0
140.0 Pre-Crisis Levels
120.0
100.0
80.0
60.0
40.0 Price Index (ALL)
20.0
Rental Index (ALL)
0.0
Jan-93 Aug-94 Apr-96 Dec-97 Jul-99 Mar-01 Nov-02 Jul-04 Feb-06 Oct-07 Jun-09
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Price and Rental Index Trend
Residential property prices and rents have returned to pre-crisis levels (with prices
and rents even approaching to more than 80% of the 1997 level).
200.0
1997 Levels
180.0
160.0
140.0 Pre-Crisis Levels
120.0
100.0 REAL ESTATE BUBBLE
FORMED ??
80.0
60.0
40.0 Price Index (ALL)
20.0
Rental Index (ALL)
0.0
Jan-93 Aug-94 Apr-96 Dec-97 Jul-99 Mar-01 Nov-02 Jul-04 Feb-06 Oct-07 Jun-09
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Class A: 40 sqm
Class B: 40-69.9 sqm
Price Index Trend Class C: 70-99.9 sqm
Class D: 100-159.9 sqm
Class E: 160 sqm
Private Domestic Price Index
250.0
(1999 Price)
200.0
1997 Levels
Post-Crisis Levels
150.0
100.0
05Q1
93Q1
93Q3
94Q1
94Q3
95Q1
95Q3
96Q1
96Q3
97Q1
97Q3
98Q1
99Q1
99Q3
00Q1
00Q3
01Q1
01Q3
02Q1
02Q3
03Q1
03Q3
04Q1
04Q3
05Q3
06Q1
06Q3
07Q1
07Q3
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q1
11Q3
12Q1
12Q3
k s tse 41
REAL ESTATE BUBBLE
Rental Index Trend FORMED ??
07Q3
11Q1
93Q1
93Q3
94Q1
94Q3
95Q1
95Q3
96Q1
96Q3
97Q1
97Q3
98Q1
98Q3
99Q1
99Q3
00Q1
00Q3
01Q1
01Q3
02Q1
02Q3
03Q1
03Q3
04Q1
04Q3
05Q1
05Q3
06Q1
06Q3
07Q1
08Q1
08Q3
09Q1
09Q3
10Q1
10Q3
11Q3
12Q1
12Q3
k s tse 42
Post-Crisis Price and Rental Trend
Price and Rental Index (All Classes): 1999 Price Level
350.0
REAL ESTATE BUBBLE
300.0 FORMED ??
250.0
100.0
50.0
0.0
96Q4
94Q3
96Q1
99Q1
99Q4
02Q1
02Q4
15Q3
00Q3
03Q3
07Q2
11Q1
11Q4
16Q2
12Q3
13Q2
14Q1
14Q4
08Q1
08Q4
93Q1
93Q4
01Q2
05Q1
05Q4
95Q2
97Q3
98Q2
04Q2
06Q3
09Q3
10Q2
Price Index (All) Rental Index (All)
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Property Market Trend
Real Property Prices
100
90
80
70
Real New 60
50 Transaction Volume
Mortgages 40
30
20
10
0
Confirmor
Income Leverage
Transactions
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Wealth Effect of Real Estate on Consumption
Effect on Consumption Property Price Volatility(%)
Growth (%) -5% -10% -15% -20% -25%
May-04
Jun-93
Oct-08
Apr-03
Oct-97
Jan-00
Dec-10
Mar-90
May-92
Sep-96
Sep-07
Nov-09
Feb-01
May-15
Apr-91
Jul-94
Aug-95
Apr-14
Dec-98
Jun-05
Aug-06
Jan-12
Feb-13
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Wealth Effect of Real Estate on Consumption
k s tse 50
Demographic Changes and Future Housing Demand
• Demographic variables ??
k s tse 51
Demographic Changes and Future Housing Demand
• Demographic variables:
k s tse 52
Population & Demand for Property
Economic Factors
GDP Growth, Foreign Direct
Birth Investment, Interest Rates etc Death
Population
❖ Age Distribution: for
predicting HH formation
❖ HH Income Level
Immigration ❖ HH Head: male/female Emigration
❖ Life Style/Taste
k s tse 53
Statistics on Hong Kong Population and Vital Events
k s tse 55
Hong Kong Population and Vital Events
k s tse 56
Hong Kong Population and Vital Events
2000 2005 2010 2015
Number of births (‘000) 54.1 57.1 88.6 59.9
Crude birth rate (per 1000 population) 8.1 8.4 12.5 8.2
Number of deaths (‘000) 33.8 38.8 42.2 46.1
Crude Death rate (per 1000 population) 5.1 5.7 6.0 6.3
Number of marriages (‘000) 30.9 43.0 52.6 51.6
Crude Marriage Rate (per 1000) 4.6 6.3 7.4 7.1
Median age at first marriage (years)
Male 30.0 31.2 31.2 31.2
Female 27.3 28.0 28.7 29.3
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Hong Kong Population
Household Formation in Hong Kong 1981 5,150,000
1991 5,671,171
2001 6,712,500
All Marriages and First Marriage in Hong Kong 2011 7,074,729
70000
2013 7,184,194
60000
52600
50000 43286 39463 55274
42197 43081
37866
40000
41190 30879
36346 37581 35826 35703
30000
32033
27834
20000 23917
10000
0
1980 1985 1990 1995 2000 2005 2010
All Marriages First Marriage
Divorce
41190
35000 37581 35000
36346 35826 35703
30000 30000
32033
25000 27834 25000
20000 23917 20000
22271
15000 18167 15000
10000 5551 13427 14873 10000
4313
5000 2060 9404 5000
0 0
1980 1985 1990 1995 2000 2005 2010 2015
All Marriages First Marriage Divorce Decrees Granted
24.0 24.9
23.9
22.0
20.0
1980 1985 1990 1995 2000 2005 2010 2015
Median (M) Median (F)
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Household Formation in Hong Kong
Number of Domestic Household 1982-2015 2480
2500 2325 150.0
Number of Domestic Households (000s)
2197
2037 130.0
2000
1783 This tells us how many
3.9
2400 3.7
3.7
2200 3.5
1800
1600 3.1
k s tse 64
Statistics on Property and Construction
2003 2008 2013
Number % Number % Number %
Type
(‘000) (‘000) (‘000)
Public rental housing (1) 679 29.2 712 28.6 766 29.3
Subsidized sale flats (2) 395 16.9 397 16.0 391 14.9
Private Permanent housing (3) 1,258 53.9 1,377 55.4 1,458 55.7
Newly Completed Units: 2002 2003 2004 2005 2006 2007 2008 2009
Private Domestic 31052 26397 26036 17321 16579 10471 8776 14259
Public Rental 18290 15148 24682 17153 7192 13726 19050 19021
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Supply and Demand for Shelter
Vacancy Rate
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016
Small & Medium Large
• Source: Hong Kong Property Review 2012
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Supply and Demand for Shelter
k s tse 70
Contents
• Introduction
• Stock Market, Property Market, GDP, Consumption.
• Characteristics of Hong Kong Economy
• Real Estate Market Activities and Bubbles
• Supply and Demand Conditions
•Affordability Issues
• Residential Price Performance
k s tse 71
HK Monthly Household Income
• What is the median household income in 1996?
Domestic Households by Monthly Household Income
Monthly HH Income (HK$) 1976 1981 1986 1991 1996
< 2000 662350 355437 141289 75552 55597
2000 – 3999 25680a 477995 368884 115236 68272
4000 – 5999 209281 340871 202511 75595
6000 – 7999 22580b 91622 209360 218388 105639
8000 – 9999 42742 125631 181846 136577
10000 – 14999 6390 39375 146199 314379 324001
15000 – 19999 1600 12250 53412 176406 269694
20000 – 24999 1570c 8751e 25931 99649 210926
25000 – 29999 12628 58651 147295
30000 – 39999 660 2561 13573 60169 183254
40000 – 59999 560d 1261f 8358 44794 150440
60000 < 3463g 6440 36434 128263
Total no. of HHs 952,580 1,244,738 1,452,576 1,582,215 1,855,553
Affordability of Home-ownership
−240
8%
1− 1+
$1𝑚 = 𝑃𝑀𝑇 12 ⇒ 𝑃𝑀𝑇
8%
12
= $8,364.4
PV of Annuity
k s tse 73
Affordability of Home-ownership
−240
8%
1− 1+
$1𝑚 = 𝑃𝑀𝑇 12 ⇒ 𝑃𝑀𝑇 = $8364.4
8%
12
k s tse 74
Affordability Index
k s tse 75
Domestic Households by Monthly Domestic
Household Income, 1991, 1996 and 2001
Monthly Domestic 1991 1996 2001
Household Income % of % of % of
(HK$) Number total Number total Number total
< 2,000 75 552 4.8 55 597 3.0 65 855 3.2
2,000 - 3,999 115 236 7.3 68 272 3.7 97 568 4.8
4,000 - 5,999 202 511 12.8 75 595 4.1 93 018 4.5
6,000 - 7,999 218 388 13.8 105 639 5.7 116 340 5.7
8,000 - 9,999 181 846 11.5 136 577 7.4 120 721 5.9
10,000 - 14,999 314 379 19.9 324 001 17.5 318 623 15.5
15,000 - 19,999 176 406 11.1 269 694 14.5 262 086 12.8
20,000 - 24,999 99 649 6.3 210 926 11.4 223 708 10.9
25,000 - 29,999 56 851 3.6 147 295 7.9 159 470 7.8
30,000 - 39,999 60 169 3.8 183 254 9.9 219 229 10.7
40,000 - 59,999 44 794 2.8 150 440 8.1 197 311 9.6
>=60,000 36 434 2.3 128 263 6.9 179 483 8.7
Total 1 582 215 100.0 1 855 553 100.0 2 053 412 100.0
k s tse 76
Disappearing Middle Class: Widening Wealth Gap
1996 2001 2009
Monthly HH Income (HK$)
(% of total HH) (% of total HH) (% of total HH)
< 4,000 6.7 8 7.9
4,000 - 5,999 4.1 4.5 5.9
6,000 - 7,999 5.6 5.7 7.2
8,000 - 9,999 7.4 5.9 7.1
10,000 - 14,999 17.5 15.4 14.5
15,000 - 19,999 14.5 12.8 12
20,000 - 24,999 11.4 10.9 10.2
25,000 - 29,999 7.9 7.8 7
30,000 - 39,999 9.9 10.7 10.4
40,000 - 59,999 8.1 9.6 9.4
>60,000 6.9 8.7 8.4
Total 100 100 100
• Source of Data: Census and Statistics Department, HKSAR
k s tse 77
Median Monthly Income and Earnings
HKD
20000 Median Monthly HH Income
Median Monthly Earnings of Employed Persons 18000
18000 17500 17500
17000
16500
16000 16000 16000
16000
14000
12000
10500 10300
10,000 10000 9800 10000 10000 10100
10000
8000
6000
4000
2000
0
2002 2003 2004 2005 2006 2007 2008 2009
k s tse 78
Property Price and Affordability
Best Lending Rate (Prime Rate)
300000 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 281689
5.11% 5% 5.02% 6.12% 7.90% 7.59% 5.39% 5% 5% 5%
250000
200000
165494
150000
100000
50000
55661 66617
0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Class A (40 sqm) Class B (40 sqm to 69.9 sqm) Class C (70 spm to 99.9sqm)
Class D (100sqm to 159.9sqm) Class E (160 sqm)
k s tse 79
Property Price and Affordability
k s tse 80
Property Price and Affordability
$160,000
Median Monthly HH Income Class A
Class B Class C
$140,000 Class D Class E
$120,000
$100,000
$80,000
$60,000
$40,000
$20,000
$-
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
k s tse 82
Monthly HH Income
Affordability Index 𝐴𝐼 =
Monthly Mortgage Payment
6.00
Class A Class B Class C Class D Class E
5.00
3.00
2.00
1.00
0.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
k s tse 83
Problems of Affordability Index
k s tse 84
◼◼ Dec
Jan 2009:
2002: $8,000
$3,000 psf
Property Price in Hong Kong Dec 2011: $8,800 ◼
◼
July 2003: $2,200-2,400 psf
April 2004: $3,500-$3,800 psf ◼
Dec
◼ Dec 2012:
2007: $5,500 >psf$10,000 ◼
Jan-93
Jan-94
Jan-95
Jan-96
Jan-97
May-
May-
May-
May-
May-
May-
Sep-
Sep-
Sep-
Sep-
Sep-
Sep-
Month/Year
k s tse 85
Issues related to the Rise and Fall of Property Price
k s tse 87
Property Market Anomaly ?
200 000
HK$ Price per square meter: Hong Kong Class A
180 000
𝑃𝑟𝑖𝑐𝑒𝐹𝑒𝑏 − 𝑃𝑟𝑖𝑐𝑒𝐽𝑎𝑛
160 000
𝑀𝑅𝐹𝑒𝑏 =
140 000 𝑃𝑟𝑖𝑐𝑒𝐽𝑎𝑛
120 000
100 000
80 000
60 000
40 000
20 000
0
Apr-02
May-03
Mar-01
Mar-07
May-09
Aug-17
Apr-08
Nov-02
Jul-05
Oct-07
Aug-11
Feb-00
Aug-00
Feb-06
Sep-06
Jun-15
Dec-15
Sep-01
Jan-99
Jun-04
Jan-05
Nov-08
Dec-09
Jul-10
Oct-13
May-14
Jul-16
Jul-99
Dec-03
Sep-12
Mar-13
Jan-11
Jan-17
Feb-12
Nov-14
• Monthly performance of property price? Any market anomaly?
k s tse 88
Property Market Anomaly ?
𝛽6 𝐽𝑢𝑛 + 𝛽7 𝐽𝑢𝑙 + 𝛽8 𝐴𝑢𝑔 +𝛽9 𝑆𝑒𝑝 +𝛽10 𝑂𝑐𝑡 + 𝛽11 𝑁𝑜𝑣 +𝛽12 𝐷𝑒𝑐
• MR is monthly return
• Feb, Mar, Apr, May etc are all Dummy Variables
– Feb = 1 for the month of Feb, otherwise 0 etc.
• Regression Results ??
k s tse 89
Property Market Anomaly ?
k s tse 92
Q&As
Kwok-Sang (Maurice) Tse
The University of Hong Kong
ktse@hku.hk
k s tse 93