Private land use for public housing projects: The Influence of a Government Announcement on Housing Markets in Hong Kong

Insufficient land supply and housing shortage limit the development in Hong Kong. To tackle such obstacles, the Hong Kong government launched a new housing initiative in June 2018, that is, to reallocate private housing sites for public housing in East Kowloon. Yet, the initiative may give rise to two important questions: (1) how does this initiative affect the housing searching behaviour in the housing market; and (2) in what way should the new public housing be developed, if it is to be compatible with the host neighborhood - by the public sector, or with the participation of the private sector. Little is known about the possible impacts of such an initiative. To fill this research gap, this paper adopts an improved spatial econometric model by incorporating spatial and temporal information to explore the above two questions. Our results indicate that (1) the announcement of the initiative leads to a 5% change in time-on-market for private housing in East Kowloon; (2) people in private property prefer more to live near public housing developed by the private sector. These findings somehow echo the invasion theory of urban change: Neighborhood changes in private housing areas will spill-over to adjacent urban areas.