چیزی که محرک املاک مسکونی در بازار هنگ کنگ است_ مدل ارزش فعلی مارکوف سوئیچینگ

The property market of Hong Kong is one of the most volatile in the world. This study attempts to investigate the proposition that the Hong Kong residential market is only driven by fundamentals. The investigation is based on a Markov switching present value model, which explicitly accounts for a rational speculative bubble. The estimates show that not only does the model capture the asymmetric market responses to information and noise, but it also gives evidence on investor heterogeneity. The study also finds that the influence of the rational bubble is statistically significant.

The property price of Hong Kong is one of the most volatile in the world. Many suspect that such observed price behavior is driven by speculative bubbles. Nevertheless, there have been relatively few research papers devoted to this topic [1]. In this study, the author will examine four classes of Hong Kong's residential properties: domestic premise class A, B, C, and D. These are defined as residential properties with saleable area less than 40, 40–69.9, 70–99.9, and over 100 m2, respectively. The time series are CPI (housing)-deflated monthly price and rent indices from March 1980 to February 2006.1 The study is motivated by two observations, the first being the change in price–rent ratio. The present value model suggests that the price and the rent indices should move more or less hand in hand. But this is not the case in the data. Instead, the price–rent ratio followed the price movement closely. The second motivation is the large discrepancies in price growth across different classes. During the two early expansions in the sample period, occurred in January 1991–April 1994 and January 1996–June 1997, the luxury end of the market significantly outperformed the lower end. In particular, class D went through the most impressive price growth relative to other classes, especially class A. Between January 1991 and April 1994, class D price rose by 145.68% (in real terms, same for the rest), which is almost three times the price growth in class A. After the Asian financial crisis, the market tumbled all the way down. By September 1998, all classes shed more than half of the values. The property market, however, embarked on a remarkable recovery in mid 2003. In this recent expansion, class D again greatly outperformed class A (Fig. 1, Table 1). If these price growths are driven by economic fundamentals other than the rent, the impact of these fundamentals on different classes should have been similar. Do these observations imply the existence of a speculative bubble? If so, how much of the recent rise in the property prices can be attributed to a speculative bubble? These are the issues the current paper is interested in. The literature on property price bubbles stretches back to the 19th century [2]. Yet, until the current date, bubble is not well defined. Loosely speaking, a bubble exists in a price if the price is other than what is warranted by its fundamentals. Here comes the trouble: what is or what are the fundamentals of an asset price? In the property price literature, there is no unified theoretical framework, which clearly defines THE FUNDAMENTALS. Typically, different researchers will use different fundamentals in their theoretical or empirical models [3], [4], [5] and [6]. This study will adopt the present value approach, which is well accepted in the financial economics literature, but will allow for asymmetric responses. The asymmetry is captured by a state variable following a first order Markov chain. This state variable is unobservable, but can be inferred from some observables using discrete Kalman filter [7]. The present value model was initially developed for the stock market. The property market has a number of features, which differ from those of the stock market. For example, it involves high transaction costs, it suffers from restrictions in supply in cosmopolitan cities, and its institutional arrangements differ from those for the stock market [1]. However, both stocks and properties are assets, which store the wealth of the economy. As such, the decisions to hold one asset or the other must have a common ground: the expected return to the asset. This is the rationale behind the use of the present value model in this study. Researchers in various countries point to speculation as a prime force behind cycles in real estate markets. A number of reasons have been suggested as to why a real estate market is more likely to be inefficient and more prone to a speculative bubble. These include institutional arrangements, high transaction costs, collateralized lending process, loan under-pricing, myopic pricing, lengthy lags, and restrictions in supply [1], [4], [5], [8], [9], [10], [11] and [12]. Among all, restriction in supply is often cited as one of the key factors causing speculative bubbles in the real estate market. It is argued that while speculation is usually thought of as a demand-side phenomenon, whether speculative behavior will be observed and a bubble will be formed depend on supply conditions. Malpezzi and Wachter [11] in their simulation study show a very interesting result: speculation hardly matters at all in a market with elastic supply. Hence, they argue that markets with more responsive regulatory environments or less natural constraint will experience less speculation and price volatility.

Evidences emerged from the current empirical study do not support the proposition that only fundamentals drive Hong Kong's residential market. A rational speculative bubble plays an important role, especially in class D. Unlike Seoul's and Singapore's residential market [15] and [17], however, there is no evidence of the fundamental being dominated by the speculative demand. The parameter estimate of the bubble proxy is smaller than or similar to that of the current rent growth. This is the case both when a Markov switching model and when a latent regressor model are estimated. For class A and B, the primary driving force of the price growth is the current rent growth. However, rent is not a significant determining factor in class C and D, the luxury residential properties. The Markov switching present value with rational bubble model takes into account the fact that the market may respond differently in different phase to information and noise. When compared to the present value with rational bubble model which account for latent information but not asymmetric responses, it improves the in-sample fitting for class B and D, but not for class A and C. It, however, generates smaller forecast errors in all classes (combination of the two models is tempting but technically impossible as far as the author is aware). Nevertheless, the fundamental plus the rational bubble can explain half or less of the price variations. This leaves ample room for investigating into irrational speculative bubbles. However, the irrationality of the market is a hotly debated subject [1], and is beyond the scope of the current investigation. The study confirms the preliminary observations that class D is the most prone to rational speculative bubble among all classes. It is also the only class where the price responds to the rational bubble differently in different states. A 1% growth in the bubble drives price to grow by 0.62% in state one, but decline by 0.44% in state two. This difference makes it look like THE BATTLEFIELD for the speculators in Hong Kong's residential real estate market. In state one, one group of investors blow up the rational bubble without meeting much countering forces (the other group is watching and waiting for the opportunity to snatch their profits). In state two, some investors from the first group convert and join the other group who believe the price is out of line with the fundamentals. They sell if the price is too high, buy if too low. Their action dampens the bubble. In this state, the first group is still active but its influence is dominated by that of the second. Thus, not only does the model capture asymmetric market responses, but it also gives evidence on investor heterogeneity. The upbeat tone of the market took a sharp V-turn in May 2005. But it is hard to tell at this moment whether it is a temporary break of a long-rally or the beginning of another free-fall. It all hinges on the mood of the investors.