Macroeconomic Determinants of Housing Prices in Hong Kong

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Simon M. S. So
Frankie S. L. Wan


This article aimed to study the causal relationship between the housing prices and the macroeconomy in Hong Kong from 1998M1 to 2019M12. We explored both the long-term and short-term causalities between the housing prices, proxied by the Centa-City Index (CCI), and six selected macroeconomic variables. The results indicated the presence of causality between the housing prices and two macroeconomic variables: money supply and exchange rate index. These two variables had an impact on housing prices, regardless of short-term dynamics or long-term equilibrium. While the relationship between money supply and housing prices was found to be bidirectional, the effective exchange rate index Granger caused housing prices only. Additionally, a long-term negative correlation was observed between the housing prices and the interest rates. Our findings may help investors understand the determinants of housing prices in Hong Kong and provide policymakers with some valuable insights on how to introduce fiscal policies to stabilize housing prices.

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