An empirical study on the relationship between the property size and its unit price in Hong Kong residential properties : a case of city one Shatin

Abstract

The residential unit price is assumed to decrease with the increasing property size under the valuation assumption in the Hong Kong industry practice. This research intends to investigate the relationship between the property size and its unit price in Hong Kong residential properties with the case of City One Shatin, one of the largest and most significant housing estates in Hong Kong. Possible determinants causing the unit price difference are also examined with empirical evidence, including the price appreciation level and the effects of government demand-side management measures. More than 30,000 transaction data were analyzed, breaking down into three size groups: Class A, B and C. Regression models were conducted to test the relationship between the property size and unit price, followed by generating a unit price index for each size group. With the empirical results, it is found that the property size and its unit price only have a negative relationship after the implementation of market demand-side management measures. This confirms the valuation assumption adopted in the industry practice. A deeper question is then developed: What determinants of this unit price pattern are. This is addressed by comparing the unit price index. It has been discovered that the difference in price appreciation level among the classes leads to the unit price difference: Class A has the highest growth rate while Class C is the lowest. The government demand-side management measures also impose effects on the unit price difference, LTV and stamp duties policy were studied. The cooling measures of LTV policies and DSD in the stamp duty policies contribute to widening the unit price difference between the three classes as these measures intensify the supply and demand imbalance. This study validates the valuation assumption made in the Hong Kong real estate industry practices by the case of City One Shatin. The analysis in this study reveals the relationship between property size and unit price, providing a basis for valuers to carry out valuation reports for nearby estates or housing estates that share similar attributes. Also, this study provides insights into market trends and offers evidence for government policy review. The study helps homebuyers, sellers, and developers make investment decisions based on unit price patterns and demand-side management policies.