- Housing yields a flow of housing services. Like many other commodities, housing yields services to consumers. Unlike food, however, we do not consume it directly. Housing yields a flow of "housing services" for accommodation. Therefore, instead of consuming an apartment itself, we buy the apartment for the services it delivers.
- Quality of properties varies substantially. To describe a flat in detail, much information is needed such as location, height, size, name of the developer, design of the apartment or the apartment complex, the surrounding facilities and neighbours, nearby transportation, and its age. This is why sometimes economists consider housing price as a function of these attributes. This is called "hedonic pricing" for housing.
- Housing is a durable good than lasts for a long time. If you buy an apartment, you expect it to "be there" for at least 20 years. The flow of services yielded by an apartment once it is built lasts for a long time. Since housing is a durable good, there is of course a resale value for second- or third-hand apartments. Although an apartment's flow of services lasts for a long time, its value falls as time goes by as the value of the apartment starts depreciating. New apartments are usually equipped with better or often more modern furnishings that the old ones lack. This makes the old apartments worth less in general.
- Housing is sometimes treated as an investment asset. Since housing is a durable good and has resale value, it is possible for someone to make a profit out of a capital gain. What drives the price of housing up and down is worth understanding. For now, we can say that an apartment yields a housing service that has a market price called rent. Thus, a flat is worth a price because it yields marketable services. Also, forces of supply and demand play an important role in determining the value of an apartment.
- The value of an apartment represents a substantial share of a household's lifetime income. It is well known that apartments in Hong Kong are very expensive. To get a feel for how expensive apartments in Hong Kong are, consider the following: an apartment of 400 square feet in 1999 cost about $1.2 million, but the medium annual household income was only about $210,000. It follows that when the value of apartments fluctuates, the perception of the lifetime income of those whose own an apartment also fluctuates, as does the consumption of the economy.
Source: "ECON A203 - Hong Kong Economy", OUHK (2017)
