Markets at Work

Markets at Work: Dynamics of the Residential Real Estate Market in Hong Kong

B. Renaud
F. Pretorius
B. Pasadilla
Copyright Date: 1997
Pages: 128
https://www.jstor.org/stable/j.ctt2jc2kb
  • Cite this Item
  • Book Info
    Markets at Work
    Book Description:

    'The real estate economy of Hong Kong is one of the most dynamic and sophisticated in the world, and has contributed greatly to the spectacular development of this vibrant city. More importantly, at a time of rapid globalization of the world economy, it is possibly the best model of the behaviour of an advanced real estate industry operating in an open economy. Hong Kong is thereforeof interest to analysts and policymakers everywhere, not least because of Hong Kong's political reintegration with China in 1997. With this in mind, the authors have managed to capture the key economic features of the private residential real estate market in Hong Kong in this compact volume. They have identified and highlighted critical institutions that contribute to the success and economic factors which shape the dynamics of all sectors of the real estate industry in Hong Kong. This book is essential reading for market analysts, policymakers, students and international readers with an interest in comparative analysis of real estate markets and institutions.' Professor Anthony Walker, Centre for Real Estate and Urban Economics,The University of Hong Kong.

    eISBN: 978-988-220-220-7
    Subjects: Business

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-viii)
  3. List of Illustrations
    (pp. ix-x)
  4. List of Tables
    (pp. xi-xii)
  5. PREFACE
    (pp. xiii-xvi)
    Bertrand M. Renaud, Frederik Pretorius and Bernabe O. Pasadilla
  6. 1 INTRODUCTION
    (pp. 1-16)

    The real estate sector forms a major part of any economy both by its sheer size and also by its extensive influence on the various sectors of the economy. With its various components, it has the unique characteristics of being simultaneously a major input in the productive capacity of the economy in the case of office, commercial and industrial real estate and a major input in the consumption choices of households in the case of residential real estate. It is also an important investment vehicle for both individual and institutional investors as an investment good, while also being the output...

  7. 2 THE HONG KONG ECONOMY AND REAL ESTATE SECTOR: AN OVERVIEW
    (pp. 17-32)

    It can be argued that Hong Kong, as a world city concentrating on finance, information and trade has only three remaining strategic advantages in the economic competition between world cities; namely its resourceful and highly ingenious people, its well-developed and free port and location on the southern coast of China, and possibly the most open economy in a world that is still in the process of breaking down barriers to globalization. As a post-industrial economy, these factors make the utilization of Hong Kong’s limited land resources extremely important for its continued economic success. This chapter provides background to Hong Kong’s...

  8. 3 THE PRICING AND ALLOCATION OF SPACE IN HONG KONG (QUADRANT 1)
    (pp. 33-44)

    In this chapter, a number of salient features of the behaviour of the private residential market in Hong Kong are discussed. These include the presentation of an introductory analysis of the rental market performance when compared to behaviour predicted by theory, prior to presenting an analysis of how the rental market performance contributes to the determination of asset prices (Chapter 4). In particular, four questions are addressed:

    What determines rents, i.e. the pricing of residential space?

    How responsive are rents to changing market conditions?

    Why is the rent level high in Hong Kong?

    Is there any evidence of a worsening...

  9. 4 VALUATION AND DYNAMICS OF HOUSING PRICES (QUADRANT 2)
    (pp. 45-64)

    The price formation process for real estate assets includes at least two interrelated activities. Firstly, when viewed strictly as an investment good from the investor’s viewpoint, the value (and price, if the asset is transacted) in an efficient market for real estate assets is a function of the expected, discounted net income (that the real estate asset is expected to generate) adjusted for risk in comparison with alternative investment opportunities. Shifts in investor expectation within the real estate industry as well as changing macroeconomic conditions in the wider economy affect the value of housing assets. Secondly, real estate asset prices...

  10. 5 SUPPLY RESPONSE AND REAL ESTATE DEVELOPMENT (QUADRANT 3)
    (pp. 65-82)

    The second part of the real estate capital market models the process of supply of new housing assets, and is represented in Quadrant 3. It considers the combination of various resources required to create new real estate assets, and is concerned with the economics of the development industry and the inputs it deploys; namely land, construction services, economies of scale, project economies and more. It is also concerned with factors that constrain supply and how they affect prices.

    Five questions are addressed in this quadrant to indicate the location and shape of the supply curve for Hong Kong:

    How do...

  11. 6 THE STOCK ADJUSTMENT PROCESS IN HONG KONG (QUADRANT 4)
    (pp. 83-92)

    Analyses of real estate development processes by their nature frequently concentrate on the supply of new real estate (the ‘flow’ of new supply over time), because it is such an important consideration to the construction industry, several profession and also the manufacturing sector of economies. It is therefore not surprising that the impact of the existing stock and its adjustment on price formation in the rental and asset markets is often underestimated. An important contributing factor is lack of cross-sectional and longitudinal data to estimate depreciation and stock adjustment relationships, particularly since real estate assets have extremely long economic lives....

  12. 7 USE OF THE FDW MODEL TO INTERPRET POLICY EVENTS
    (pp. 93-106)

    The real estate industry is an important sector in most economies, and inappropriate policy towards it has the potential to cause misallocation of resources on a large scale. In analyses of the various activities that make up the economics of each sector of the real estate markets as modelled by the FDW model, we have identified a limited number of public-policy sensitive characteristics of the structure of the residential real estate market in Hong Kong. We proposed in Chapter 1 that one of the advantages of the two-sector FDW model is that it allows the exploration of particular policy proposals...

  13. 8 LOOKING AHEAD
    (pp. 107-108)

    The true test of the modern presentation of a real estate economy with the two-sector model is whether it succeeds in going beyond the presentation of the key features of the industry and strengthens our ability to analyse proposed public policy actions. We believe that the robustness of the two-sector model displayed in use allowed this admirably for Hong Kong, while it also allowed us to analyse the essential dynamism of the industry and assess the impact of policy initiatives and structural changes on the sector. We believe that it will be similarly useful in analysing the outcomes of cyclical...

  14. REFERENCES
    (pp. 109-112)
  15. INDEX
    (pp. 113-119)
  16. [Map]
    (pp. 120-120)