Building a house prices forecasting model in Hong Kong

This paper builds a house prices forecasting model for private residential houses in Hong Kong, based on general macroeconomic indicators, housing related data and demographic factors for the period of 1980 to 2001. A reduce form economic model has been derived from a multiple regression analysis where three sets and eight models were derived for analysis and comparison. It is found that household income, land supply, population and movements in the Hang Seng Index play an important role in explaining house price movements in Hong Kong. In addition, political events, as identified, cannot be ignored. However, the results of the models are unstable. It is suggested that the OLS may not a best method for house prices model in Hong Kong situation. Alternative methods are suggested.