Housing Price Dynamics : A First Order Logarithmic Differential Linear Regression Approach

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Housing Price Dynamics in Fast-Growing City-State Economy: A First Order Logarithmic Differential Linear Regression Approach in the Case of Macau Shansong Yu November 2014 ABSTRACT This paper studies housing dynamics in Macau using first order logarithmic differential linear regression approach. Seven potential drivers including interest rate, preference towards property allocation, gaming industry revenue, consumer price index (general), domestic purchase, foreign purchase and the buyer component of the market are analyzed. The linear regression analysis yields a large and statistically significant effect on domestic purchase, foreign purchase and buyer component. Two possible explanations are given for the insignificant factors. Key…show more content…
After the Macau government ended the gaming monopoly in 2002, Macau achieved the highest GDP per capita by purchasing power parity as of 2013, from the statistic of the World Bank. 1.2 This paper used three models to study seven drivers to the changes in housing price in Macau. To minimize the influence of multi-collinearity and multi-correlation problems among the items, first order logarithmic differential linear regression is introduced to the model. factors being studied are as follows: interest rate, preference towards property allocation, gaming industry revenue, consumer price index (general), domestic purchase, foreign purchase. In the later section of the paper (Model II), percentage of foreign purchase is introduced to replace domestic purchase and foreign purchase to examine whether buyer component is related to the change in price. In model III, time lag effect is also taken into consideration in the model and examined. Regression result suggest that foreign and domestic transactions has signification effect on the changes in housing price, while changes in consumer price index, gross gaming revenue, preference towards property allocation on newly married couples and interest rate did not show signification short-term effect. In analysis, I proposed two possible explanations for this phenomenon. On the other hand, buyer component has a significant influence to the change in price. The
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