Date Added: Dec 2010
Sharp increase in house prices in Hong Kong SAR in 2009-2010 has led to concerns of an emerging real estate bubble. According to the measure of price deviation from fundamentals, which should be taken as an early warning indicator of market exuberance, the current level of house prices in Hong Kong SAR does not seem to be significantly higher than would be justified by underlying fundamentals. Moreover, unlike advanced economies before 2007-8, deviation from fundamentals has not been persistent in Hong Kong. Going forward, low interest rate and improving growth prospects, as well as a tight supply, particularly in the mass market, means that house price growth will continue to be strong.