Authors: Ming-Te Lee, Shew-Huei Kuo and Ming-Long Lee

Year: 2018, Volume 28 No. 1
Pages: 150-165

Abstract:

This study explores whether and how office property prices diffuse across quality classes in Hong Kong. The empirical results reveal that the trends in office property prices are stochastic and demonstrate significant price lead-lag relationships among office property classes. The lead-lag patterns are apparent in both the long run and the short run. In addition, shocks from Class C prices have the strongest and longest-lasting impact on office prices in Hong Kong. In addition to providing new evidence on the ripple effect of commercial property prices across quality classes, this is the first study to explore the ripple effect of commercial property prices in both the short run and the long run. This study is also the first to employ the Vogelsang test (1998) and impulse response analysis to investigate the diffusion of commercial property prices. The findings have implications for government authorities, investors, and financial institutions in terms of policy formation, the timing of office property investments, and the diversification of their office-property-related portfolios.

 

Keywords: Office; Commercial Property; Ripple Effect; Quality Class; Filtering Down; Trading Up.