ABSTRACT
Basic economic studies suggest that demand for a product is determined by population, economy and cost of production. Similar to other commodities, housing prices are affected by a bundle of factors such as business cycles (Li 2014), weather (Li 2011), environmental externalities (Li 2012b) and climate (Li 2009). Chau et al. (2001)’s research showed that housing prices in Hong Kong are determined by the capital markets and macroeconomics factors. The impact of bad news is only reflected on the more liquid property stock prices and later in housing prices and therefore housing price appeared to lag behind indirect real estate (Newell and Chau 1996). Lee (2009)’s research conceded that a lower unemployment rate increased housing prices. The negative coefficient of the previous volatility of unemployment rates determines current volatility of housing prices.
