Valuing Long-Term Property Rights with Anticipated Political Regime Shifts

We identify exposure to political risk by exploiting a unique variation around land lease extension protection after 2047 in Hong Kong's housing market due to historical arrangements. Relative to properties that have been promised an extension protection, , those with unprotected leases granted by the current government are sold at a discount of 8 percent; ; those with colonial leases suffer an additional discount of 8 percent. Incorporating estimated structural parameters that suggest an additional 20 percent ground rent after 2047, , our model matches empirical discounts well across lease horizons. Discounts increase over time, , particularly in areas with greater pessimism about the city's future. ( JEL D72, G12, R31, R38) )