Abstract
The purpose of this paper is to identify structural changes in the Korean housing market for evaluating the sustainability of the Korean housing market and to derive important implications to seek housing business strategies and public policies. Two time periods were analyzed: April 2001–December 2007 and January 2008–December 2014 to identify the impact after the global financial crisis of 2008. The market was divided into transaction, chonsei, and monthly rent. The correlations were analyzed using a vector error correction model (VECM). A key result was that during the economic depression, demand for chonsei did not flow to the transaction market; this phenomenon affected the overall recovery of the housing market. The supply of chonsei today is rapidly decreasing with the depression in the transaction. Increases in chonsei prices are expected to continue along with the possibility that demand for chonsei will flow into the transaction or monthly rent market. Based on recent trends, the chonsei market, once main stream, will gradually weaken, and the Korean housing market will reorganize into transactions and monthly rent. This structural change may turn the Korean housing market into a target for long-term investments.
Highlights
As the subprime mortgage crisis spread globally, it depressed the financial market and the construction business in Korea
The structure of the Korean housing market as it went through rapid macroeconomic fluctuations pre- and post-2008 was comparatively analyzed through an impulse response analysis
The objective of this paper is to comparatively analyze the dynamic relationship between the Korean housing transaction market, chonsei housing market, and housing monthly rent market before and after macroeconomic fluctuations. This is done by defining the Korean housing market utilizing the FDW model and setting the analytical variables
Summary
As the subprime mortgage crisis spread globally, it depressed the financial market and the construction business in Korea. As the housing market entered a decline after the financial crisis with the selling prices falling, the burden on rental tenants increased as monthly rental fees increased. Due to such macroeconomic fluctuations, the housing market system in Korea has changed. The chonsei deposit, which is held during the contract period and repaid by the landlord, is the substitute for such payments [1]. The whole housing market maintained a stable downward trend until 1996, before the outbreak of the foreign exchange crisis
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