K.W. Chau

Linkages between direct and indirect property performance in Hong Kong

Assesses the relationship between Hong Kong property company and commercial property market performance over 1984‐94. Finds that property companies provide a useful source of transaction‐based information about changing property market fundamentals. The unique property market characteristics in Hong Kong mean that information is impounded into direct property series quickly, within one quarter of being impounded into indirect property company stock prices. Finds a common “pure” property element that influences both property company and property market returns. This results in investors capturing some portion of Hong Kong property market returns by investing in property companies, as well as achieving liquidity and portfolio diversification.

Price discovery in the Hong Kong real estate market

This paper examines price discovery for four sectors of the Hong Kong property market. The Hong Kong property market is one of the deepest and most liquid markets in the world. In addition, a substantial proportion of the real estate sector is securitized in the local share market. This makes Hong Kong one of the better places to examine price discovery. The results show that the returns to securitized real estate in Hong Kong are a mirror of broader international capital market movements. Once international capital market variables are included in the regressions, the returns to securitized real estate in Hong Kong convey little information about the appraisal-based returns to Hong Kong real estate. In addition, the results show that both capital market variables and local economic variables are significant for explaining the appraisal-based returns to Hong Kong property. The two sets of variables account for from 58% and 87% of the total variation in returns, with capital market factors contributing between 32% and 75% to the explanatory power.

Estimating the value enhancement effects of refurbishment

There have been very few empirical studies investigating the value enhancement effects of refurbishment and most rely on cross‐sectional data, which cannot show the before and after effects conclusively because of the heterogeneous nature of the properties. The problem of refurbishment is more complicated in buildings or housing estates with multiple‐ownerships, since refurbishment is a collective decision, which can sometimes be difficult to achieve. Uses panel data in Hong Kong to estimate the impact of refurbishment on the market value of properties in a large housing estate. The results show that the refurbishment brought about approximately a 9 per cent increase in the market value of the properties, which far exceeds the cost of refurbishment. Suggests that property owners of a housing estate will benefit if they can reach a collective decision on renovation.

Monte Carlo simulation of construction costs using subjective data

This paper critically examines the problems arising from the assumptions of independence and triangular distribution in the risk analysis of construction costs. These two assumptions have been widely adopted by researchers and practitioners alike. However, they lead to bias in the analysis. With the aid of a spreadsheet and a risk analysis add-on program, the nature of the resulting bias can be illustrated using both empirical and simulated data. Various possible solutions which seek to reduce the bias are explored. Their practicality under real life constraints is examined. A tentative practical solution is proposed and evaluated against the existing approach. The method and logic of the solution are also discussed. The approach is applied to two sets of data to illustrate its use and to test the reasonableness of the approach.

Assessing the health and hygiene performance of apartment buildings

The recent global outbreak of Severe Acute Respiratory Syndrome has aroused public concern on environmental health and hygiene. Develops a practical assessment scheme for assessing the health and hygiene performance of apartment buildings in Hong Kong. The scheme involves assessing a hierarchy of building factors that have a bearing on environmental qualities, and thus occupants’ health. Proposes an index method to integrate the assessment outcomes into a simple and user‐ friendly performance indicator for public consumption. The index can inform the public of the health and hygiene risk of different buildings and facilitate building owners, developers, and government bodies to make more informed and socially responsible decisions on environmental health and hygiene improvement. Although the assessment scheme is tailored for the institutional and cultural settings of Hong Kong, the assessment framework for the development of the scheme is also applicable to other cities.

The measurement of total factor productivity of the Hong Kong construction industry

Previous research work concerning construction productivity has often been related to labour productivity. Although easy to measure and understand, labour productivity may be misleading in measuring the efficiency of utilization of resources. An alternative concept — total factor productivity — is preferred. However, this concept has seldom been used in empirical research of construction productivity due to problems of measurement and availability of data. This paper presents a method of indirectly measuring the total factor productivity of the construction industry using various construction cost and price indices and other statistics. Although special reference has been made to the construction industry of Hong Kong, the same approach should also be applicable to other countries.

A survey of the health and safety conditions of apartment buildings in Hong Kong

Abstract A high-density built environment poses challenges to the idea of sustainable development in respect of health (e.g. SARS outbreak) and safety (e.g. fire and structural problems). To examine the seriousness of the high-density problem, this study aims to survey the health and safety performance of apartment buildings in a densely populated city, Hong Kong, using a simplified assessment scheme. An assessment scheme based on a hierarchy of building performance indicators concerning the quality of: (a) architectural design, (b) building services design, (c) the surrounding environment, (d) operations and maintenance, and (e) management approaches was developed. One hundred forty (140) apartment buildings were surveyed and assessed through site inspections, desk searches, and interviews. A performance analysis was conducted to examine and compare the overall health and safety performance of the buildings. We found that there were considerable variations in health and safety conditions across buildings, even though they are located within a single district. Most of the variations in building health and safety conditions were attributed to differences in building management systems rather than building design. Enhancing strategic management approaches (e.g. a better delineation of owners’ rights and duties) appears to be the most critical factor that underperformers should consider in order to improve their buildings.

The Value of the Provision of a Balcony in Apartments in Hong Kong

In Hong Kong, a balcony is often perceived as a “green” provision in modern residential buildings. However, how the market values the benefits of balconies is seldom studied due to the difficulty in separating such benefits from other associated effects such as view enjoyment and security concerns. This paper attempts to study the implicit value of a balcony, the green effects of balconies on the prices of residential properties, and the effect of security concerns on balconies situated on lower floors. A sample of transactions in a private housing estate in Hong Kong has been studied. The sample contains apartments with and without balconies. A balcony is found to have a positive effect on the value of a property irrespective of the quality of the view. The negative effects of air and noise pollution on property prices are also found to be highly significant. Although security concerns are found on the low stories of a building, the provision of a balcony does not aggravate the hazard. Finally, the log‐linearity assumption in the empirical price model is relaxed by applying the Box‐Cox transformation to the continuous variables.

Sick building syndrome and perceived indoor environmental quality: A survey of apartment buildings in Hong Kong

Abstract The outbreak of a highly communicable disease, SARS, in Asia in 2003 has revealed the health risk of living in a high-density environment. To show the important connection between human health and environmental quality, this study surveys the prevalence of sick building syndrome (SBS) among apartment residents and their evaluation of indoor environmental quality (IEQ). Based on a sample of 748 households living in Hong Kong, two interesting findings are revealed: (1) nasal discomfort was the commonest home-related SBS symptom despite the absence of any central ventilation system in apartment buildings; (2) noise, rather than ventilation, was the major IEQ problem perceived by residents. Our statistical analysis further showed that residents with SBS symptoms were less satisfied with their IEQ than those without. That is, despite a positive evaluation of specific IEQ criteria with respect to the building residents lived in, if they reported feeling SBS related symptoms, the overall IEQ evaluation of their building could still be negative. This perception bias gives rise to a sample selection problem in measuring perceived IEQ, which has implications on housing management practices and the formulation of a healthy housing policy.

Estimating industry-level productivity trends in the building industry from building cost and price data

A method of measuring total-factor productivity (TFP) trends in the building industry is described in this paper. This method is an improved version of the approach described in a paper by Chau and Walker in that it requires less restrictive assumptions and is theoretically less biased while requiring only slightly more data. With small modification, the same method can be used to measure other productivity trends corresponding to other productivity concepts. The data used in measuring TFP of Hong Kongs building industry are also different from those proposed in Chau and Walker. A number of modifications have been made. These modifications have been possible both as a result of work by Chau and the increased availability of statistics in recent years. One of the major difficulties in measuring TFP trends in the building or construction industry has been the lack of data. This is also one of the major reasons for the dearth of empirical studies in this area. Very few attempts have been made to solve the p...