The impact of macroprudential measures on Hong Kong's residential housing prices : transaction taxes and mortgage lending policies

Abstract

This dissertation studies the impact of macroprudential measures – transaction tax (stamp duty) and mortgage lending policies – on Hong Kong’s residential housing prices between 2008 and 2024. Although Hong Kong is known for its free-market economy, the government introduced various regulations in the housing market, with macroprudential measures one of the crucial ones. Therefore, this study utilized a mixed approach, which consists of regression analysis and interviews to examine the effectiveness and implications of these policies in the housing market comprehensively. The impact of tightening and loosening of stamp duty and mortgage policies are investigated in this study. Research findings show that the loosening of mortgage policies is the only one that succeeded in altering the market trend and raising housing prices during the housing bust. Meanwhile, other macroprudential measures are found to have an impact on housing prices, but their effectiveness was not strong enough to reverse the price trend. Furthermore, the impact of the policies varied across different property segments and regions, with smaller and urban properties being more responsive. Additionally, time-lagged effects were spotted and policy impacts tend to change over time. Qualitative findings from interviews agree with the quantitative results on the impact of macroprudential measures and further point out that macroprudential measures are ineffective tools for regulating the housing market and controlling housing prices. This study concludes that macroprudential measures should not be over-relied in Hong Kong’s housing market as their impact is limited or temporary. They cannot tackle the fundamental structural problem in the housing market and are inadequate for long-term housing affordability and stability. Instead, the focus could be shifted to supply-side policies that play a more significant role as housing market regulators.