Housing consumption and residential crowding in Hong Kong: a long‐term analysis

Purpose – Residential crowding and underlying causes of crowding have been changing across the globe over time. The aim of this paper is to examine the dynamics of housing consumption and residential crowding in Hong Kong. Design/methodology/approach – While the two‐step Engle‐Granger co‐integration approach based on an error correction model (ECM) is used to test for long‐run relation and short‐run dynamics of housing consumption, the study also uses a multivariate regression model to analyze the factors affecting residential crowding. Along with other variables in previous literature, the study introduces a new institutional factor, i.e. land supply, into the model that analyzes these two issues over a time span of 25 years. Findings – The study's results suggest that many households in Hong Kong still have inadequate housing, and residential overcrowding is a serious issue. Coupled with market forces (e.g. income, housing price, household size), the new land supply factor noticeably has exerted significant influence on the two subject issues under investigation. Practical implications – The paper provides policy implications that to address such deficiencies, the government should change its current land supply policy. A policy shift is recommended away from its “high‐land price” policy towards comprehensive developments in outer urban areas. This institutional change should help improve housing consumption in the territory overall. Originality/value – This study adds knowledge to previous works in analyzing residential crowding and its underlying causes over the years, rather than in a particular point in time. It is also the first of its kind in Hong Kong.