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In Recent Years, Hong Kong’s House Prices Have Risen Very Rapidly. Please Use the Supply and Demand Theory to Analyse the Reasons for Rising Housing Prices, and Also Discuss the Possible Effects on the Housing Market If

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In Recent Years, Hong Kong’s House Prices Have Risen Very Rapidly. Please Use the Supply and Demand Theory to Analyse the Reasons for Rising Housing Prices, and Also Discuss the Possible Effects on the Housing Market If
Hong Kong is one of the most densely populated cities in the world. Meanwhile, it also has the highest housing price in the world. According to the 8th Annual Demographia International Housing Affordability Housing Affordability Survey’s report in 2011 which had been recommended by World Bank and the United Nations, Hong Kong had the most unaffordable housing in the survey with a median multiple of 12.6. Median multiple means median house price divided by gross annual median household income. To figure out the reasons which drive Hong Kong housing prices rise rapidly, this essay is divided into four parts to analyse the question. The first part will briefly introduce some basic information about Hong Kong housing market. The second part is going to take through upon the supply and demand theory which is the main theory to explain the question. The third part will explain the reasons in two aspects which are demand and supply. The final part will estimate possible effects on the housing market if there is a belief that house prices will keep rising.

It is essential to firstly introduce the special housing structure of Hong Kong. According to Hong Kong Housing Authority, there are almost 2.6 million residents units in Hong Kong. Of those, 761000 live in Public Rental Housing (PRH), 391000 live in Subsidized Home Ownership Housing and 1447000 live in Private Permanent Housing. PRH and subsidized home ownership housing which are provide by Hong Kong government are aimed at insuring low-income family have housing. In another word, almost half of Hong Kong residents live in houses with government subsidies.
According to Hong Kong Housing Authority Report
According to Hong Kong Housing Authority Report

Actually, the real customers in housing market are high-income families and speculators. They are able to afford the high housing price, what’s more, they can benefit from the appreciation in asset value. This housing structure is made by the government which
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