Property Value, User Cost, and Rent: An Investigation of the Residential Property Market in Hong Kong

Abstract

We investigate the adjustment between the user cost of housing capital, rent, and property value using the impulse response analysis. We find that in the Hong Kong residential property market, rent responds to changes in the user cost relatively fast. But the direction of the responses varies. About one third displays incomplete response, another one third over-responds, and the rest displays a negative relationship. Further work is called for to clarify such results.