In this study we examine the relationship between land supply and housing price, percentage of land premium in the total government revenue and housing price, with reference to Hong Kong from 1981 to 1994. To do this we employ the Granger causality method to test the underlying hypothesis whether Hong Kong Government adopt high land-price policy. We use the first difference of data to ensure the stationarity in time series with the help of augmented Dick-Fuller unit root test. The results of the paper suggest no strong evidence to support the view that the land control of the government has caused soaringly rising housing prices. The findings also apparently implicate that the government has the revenue-maximizing behavior which is consistent with efficient allocation of resources.
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