HONG KONG INSTITUTE FOR MONETARY （香港货币研究所）.pdf

HONG KONG INSTITUTE FOR MONETARY RESEARCH RENTAL ADJUSTMENT AND HOUSING PRICES : EVIDENCE FROM HONG KONG’S RESIDENTIAL PROPERTY MARKET Honglin Wang, Chu Zhang and Weihang Dai HKIMR Working Paper No.01/2013 January 2013 Hong Kong Institute for Monetary Research (a company incorporated with limited liability) All rights reserved. Reproduction for educational and non-commercial purposes is permitted provided that the source is acknowledged. Rental Adjustment and Housing Prices: Evidence from Hong Kong’s Residential Property Market Honglin Wang* Hong Kong Institute for Monetary Research and Chu Zhang* The Hong Kong University of Science and Technology Hong Kong Institute for Monetary Research and Weihang Dai* The Chinese University of Hong Kong Hong Kong Institute for Monetary Research January 2013 Abstract This paper investigates the interaction between housing prices and housing rentals. Standard economic models treat housing prices as the present discounted value of future rentals with the latter treated as exogenous. Casual observation, however, suggests that changes in rental prices often follow housing price changes. Economic theory also supports the view that rental prices may not be exogenous. Extending the user-cost