The Effectiveness and Consequences of the Hong Kong Government's Cooling Measures For Residential Housing Markets

We study the overall effectiveness, unintended consequences, and transmission mechanisms of the cooling measures imposed by the Hong Kong government between 2009 and 2017 on the residential property market. We use comprehensive micro-level transaction data and adopt a regression discontinuity design to conduct the empirical analysis, and find that the mortgage-tightening measures effectivelycurbed the overheated property market by reducing price and trading volume in the short term, although specific submarkets experienced volatilities on occasion. We also document that the tax-driven measures were more efficient in suppressing trading activities, but they also triggered price volatilities across market sectors. Several rounds of measures had a spillover effect on subsidized public housing units.Our empirical findings have implications for policymakers seeking to review and revise the current curbs on the Hong Kong property market