A Tale of Two Cities: Mainland Chinese Buyers in Hong Kong Housing Market

44 Pages Posted: 8 Nov 2019 Last revised: 22 Feb 2021

See all articles by Yi Fan

Yi Fan

National University of Singapore (NUS) - Department of Real Estate

Maggie Hu

The Chinese University of Hong Kong

Wayne Xinwei Wan

University of Cambridge - Department of Land Economy

Zhenping Wang

State of Wisconsin Investment Board

Date Written: February 9, 2021

Abstract

This paper examines the effect of mainland Chinese buyers' housing purchase in Hong Kong. Contrary to media's allegation on mainland buyers causing huge bubbles in Hong Kong housing market, we find that mainland buyers only constitute less than 4% of housing transactions in Hong Kong from 2001 to 2017, and their price premium over locals is only 1.4% on average. The mainland premium is higher for properties attracting more interests from mainland buyers, such as luxury units larger in size (3.52%). We also find that the price premium varies with hedging demand for the currency risk over time (safe haven effect). Furthermore, the price premium is higher in buildings with more existing mainland homeowners (residential sorting). At last, the price premium is lower if the mainland buyer has stronger bargaining power such as more prior transaction experience or facing a mainland seller.

Keywords: Hong Kong housing price, Chinese investors, safe haven effect, residential sorting, bargaining power

JEL Classification: R23, O18, F22

Suggested Citation

Fan, Yi and Hu, Maggie and Wan, Wayne Xinwei and Wang, Zhenping, A Tale of Two Cities: Mainland Chinese Buyers in Hong Kong Housing Market (February 9, 2021). Available at SSRN: https://ssrn.com/abstract=3477421 or http://dx.doi.org/10.2139/ssrn.3477421

Yi Fan

National University of Singapore (NUS) - Department of Real Estate ( email )

United States

Maggie Hu (Contact Author)

The Chinese University of Hong Kong ( email )

Cheng Yu Tung Building
12 Chak Cheung Street
Hong Kong, N.T.
Hong Kong

HOME PAGE: http://sites.google.com/site/maggiehuresearch/research

Wayne Xinwei Wan

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://xinweiwan.weebly.com

Zhenping Wang

State of Wisconsin Investment Board ( email )

121 E Wilson St
Madison, WI 53703
United States

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