Essays on residential property pricing
Student thesis: Doctoral Thesis
Related Research Unit(s)
This thesis consists of three essays on residential property pricing. The first essay is about how bank loans and local amenities affect Chinese urban house prices. Using Chinese city-level data from 1999 to 2009 and considering geological, environmental, and social diversity, this study suggests that bank credit plays a significant role in driving up house prices. When the bank loans expand by one standard deviation last year, the housing price this year will be higher by 0.379 standard deviations correspondingly. In contrast, income does not appear to have much impact on property price after controlling for other factors. In addition, amenities such as quality universities, better healthcare, green infrastructure, clean air positively influence house prices. Results are robust to alternative specifications. In the second essay, we estimate the liquidity effects in Hong Kong private housing market. Exploiting a large transaction-level dataset with both sale and rental transactions in Hong Kong, this paper employs a matching estimator approach to study housing rental yield. Using three trading activity based liquidity measures, we find a negative relationship between the liquidity and the rental yield. Moreover, the liquidity is found to be more valued in less expensive submarket, and in time of financial crisis. Besides, a comparison between the volume based liquidity measure and price impact suggests the former suits the housing market better. Directions for future research are also discussed. The third essay takes the research question of the second essay one step ahead and studies the empirical determinants of the rent-to-price ratio and turnover at the real estate development (RED) level. Since the two variables are typically jointly determined in search-theoretic models, we apply a simultaneous equation method on our sample, which covers 130 real estate developments in Hong Kong. Our results suggest a form of "dichotomy" in the housing market: the demographic structure, and past return performance of a real estate development affect its turnover rate, while popularity, human capital environment, mortgage burden, and long run rent growth determine the rental yield. Our popularity index may also carry independent research interests.
- China, Hong Kong, Prices, Housing