An empirical study of the effect of announcement of northern metropolis development strategy on residential property price

Abstract

Northern Metropolis Development Strategy was announced by the Chief Executive in the 2021 Policy Address. It is a comprehensive development vision with residential, commercial, transportation infrastructure and ecological development covering multiple mature new towns and developing New Development Areas in the northern part of the New Territories. In view of the positive market reaction to the announcement of Northern Metropolis Development Strategy, this study aims to examine the spatial-temporal effects of the announcement of Northern Development Strategy on residential property price. Through studying the planning background, details of the Northern Metropolis Development Strategy and reviewing literature on factors affecting property price, real estate market efficiency and effects of announcement of metro development plans on residential property price, four hypotheses are proposed which are (1) Announcement of NM Development Strategy has immediate positive impacts to property price of residential housing in the area of NM, (2) There exists subsequent positive increase in property price, i.e., a delayed response to the announcement, (3) Increase of property price of residential property in proximity to proposed commercial area is greater than those in the other areas of NM and (4) The smaller the distance of the property to the improved transportation network, the greater the increase in the property price The four hypotheses are tested using the hedonic pricing model and event study methodology with over 100,000 transaction records of residential units in seven districts, namely Fanling, Sheung Shui, Taipo, Tin Shui Wai, Tuen Mun, Yuen Long, and Shatin. Empirical results support that announcement of Northern Metropolis Development has both positive immediate and subsequent impacts on residential property price. Hypothesis 3 is also accepted to a large extent. Extent of increase in price level of residential property in the areas closer to the largest commercial development under the Northern Metropolis Development Strategy, the San Tin Technopole, is greater. Lastly, empirical results, however, does not demonstrate the existence of any significant spatial relationship, which refers to the relationship between the extent of increase in price level and the distance between the improved transportation network and the residential property, after the announcement of Northern Metropolis Development Strategy.