The price change and determinants of residential properties in Hong Kong under the announcement of northern metropolis development strategy : evidence from Yuen Long and North District

Abstract

Various literature has revealed that urban planning policy could have a constructive influence on real estate asset prices. In 2021, Northern Metropolis Development Strategy was introduced by the Government, it is expected that new development land will be provided for residential, commercial, and other activities, as well as new infrastructural projects that would greatly enhance the accessibility and standard of living of residents living in Yuen Long District and North District, the two districts covered by the Northern Metropolis. In view of the impact brought by urban planning policy, this research aims to explore the adjustment in the price level of private domestic units in Yuen Long and North District under the background of the promulgation of the Northern Metropolis Development Strategy, and further test the heterogenous effects across flat sizes between the two districts in the Northern Metropolis. Two hypotheses are proposed in this research, 1) The change in property prices of smaller-sized flats (Classes A and B) outperforms that of larger sizes (Classes C, D, and E) in the Northern Metropolis; and 2) The outperformance of property prices of smaller-sized flats as compared to largersized flats in the Northern Metropolis varies geographically due to expectations by its proximity to improved transportation networks and major business areas. This study may deepen the understanding of the operation of the real estate market to assist decision-making for home purchasers and residential property investors, as well as policy suggestions for the Government on the alternative financing options of urban development policies. The hedonic price model is used to examine the influence of the promulgation of the Northern Metropolis Development Strategy on the private domestic units prices in the Northern Metropolis from January 2021 to September 2023. Over 6,000 transaction data of the private residential units from medium-to-large scale housing estates in Yuen Long District and North District completed between 1989 and 2019 is collected from the Economic Property Research Centre (EPRC) and input into the regression model, with supplementary data obtained from Google Maps and website of Centaline Property. The research findings are 1) There is an outperformance of property prices of smallersized units as compared to that of larger-sized units in the Northern Metropolis; 2) The effect of promulgation of the Scheme on property prices may not sustain very long or outweigh underlying market fundamentals at the initial phase of development; 3) The outperformance of property prices of smaller-sized units as compared to larger-sized units would vary geographically by its proximity to future major business areas; 4) The proximity to shopping malls may bring negative impacts on property prices in the subject area due to negative externalities; and 5) The announcement of proposed railway infrastructural projects of the Scheme may not contribute to a rise in residential property prices in the developed urban areas.