Studies of the financial crises happened in Thailand in 1997 and in US in 2007 reveal the importance of real estate market. It not only makes a large contribution to the government revenue, but also has a strong influence power to the whole economy. Therefore, it is essential to maintain the health of the property market in order to have a sound financial system and smooth economic activities. One way of ensuring the health of the market is to examine the existence of the bubbles. In the last few years, many noticeable events had acted on the property market. Except for the sub-prime mortgage crisis, a huge amount of “hot money” inflow to Hong Kong market at the end of 2008. Property price increased dramatically after 2009 which even -led to the shock brought by US negligible. With the persistent boom of the industry, we are interested in whether there is a bubble in the market. Given the unique background of Hong Kong market, we also would like to study the regime shift behavior after Hong Kong returned back to China. In this thesis, we focus on the price movement of private domestic unit with the interest rate and also the rent in Hong Kong real estate market from 1980 to 2011. The lagged effect with these two explanatory variables is measured by testing the fundamental equation which has been developed by Lai and Van Order (2010) with various lags. Results show that both the interest rate growth and expected growth rate of rent have negative effect on the difference of growth rate of price and rent, and the effects normally last for about two years. The error terms generated by the fundamental equation are then used to examine the existence of bubbles. Result shows that bubbles become obvious after 1997, but not explosive. Regime shift behavior is studied by comparing the variance of the error terms of periods before and after the handover of Hong Kong, and the shift is found in the market toward a more stable regime after 1997. Studies of this paper extend our knowledge of Hong Kong market.