Domino Effects Within a Housing Market: The Transmission of House Price Changes Across Quality Tiers
We argue that shocks to a housing market are transmitted through the hierarchy of quality tiers within a housing market. The result is the prediction of waves of house price changes accompanied by changes in transaction volume. Our study is related to existing models of spatial ripple effects across housing markets. The data are from the Hong Kong housing market. The findings from Granger causality tests strongly support the argument that domino effects within a single housing market occur in response to external shocks.
KeywordsHousing Homeownership Ripple effect Downpayment Price dynamics Equity effects Public housing Privatization Domino effect
JEL ClassificationE32 H30 R21 R31
The authors are grateful for the comments and suggestions received from two anonymous referees, Terence Chong, Daniel Cheung, and Jimmy Ran. The authors wish to thank Gary Wong for research assistance. This research was supported by two Competitive Earmarked Research Grants (No. LU3008/00H and LU3110/03H) from the RGC of Hong Kong SAR Government. However, we are responsible for all remaining errors of this paper.
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