Abstract
This paper analyzes the determinants of housing prices in Hong Kong by using property transaction data of condominium units from Taikoo Shing, one of the largest real estate properties in Hong Kong. We use a hedonic pricing model for the empirical analysis and estimate the model by using the Box-Cox quantile regression method. The empirical results show that this method provides a more comprehensive description of housing price determinants. Housing prices and characteristics have a nonlinear relationship, and this relationship varies across all quantiles. In addition, the response of housing prices to various housing characteristics varies across quantiles. For example, an increase in the size of the gross floor area is more valued at higher quantiles. Other variables have differential effects on housing prices across the distribution of housing prices. We also perform a simple simulation for model predictability and show that our model outperforms other models which have been frequently used in the previous studies.
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Notes
‘MTR’ is the abbreviation for ‘Mass Transit Railway’, the rapid transit railway system in Hong Kong.
See Koenker (2005) for an excellent comprehensive survey of quantile regression methods.
For an in-depth discussion on the indicator function and \(\mathbb {N}_{\tau ,n}\), see Fitzenberger et al. (2009).
In the empirical analysis, all results are computed using the R software. Program codes are available upon request.
A complex is defined as a cluster of high-rise buildings which have inter-connected lower level floors, often used for retail, businesses or parking.
In Hong Kong, developers use a naming convention in which “garden” and “terrace” are commonly used to name residential communities.
As shown in Fig. 1, the green box with the word ‘EXIT’ on it indicates an exit of the MTR station.
We also estimate the semi-log linear model. The empirical results are quite similar to those of the linear model. To save space we do not report the empirical results. The results are available upon request.
Bera et al. (2013) develop a new estimator which corresponds to the conditional mode of the asymmetric Laplace distribution. Moreover, the estimated quantile level (\(\hat {\tau }\)) turns out to be the most informative quantile level in a framework of information-theoretic approach. See Bera et al. (2013) for more details.
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We are grateful to the editor and two anonymous referees for their valuable comments. However, we retain the responsibility for any remaining errors.
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Kim, HG., Hung, KC. & Park, S.Y. Determinants of Housing Prices in Hong Kong: A Box-Cox Quantile Regression Approach. J Real Estate Finan Econ 50, 270–287 (2015). https://doi.org/10.1007/s11146-014-9456-1
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DOI: https://doi.org/10.1007/s11146-014-9456-1