Korean Housing Market Research Articles

주택매매시장에서의 거품에 관한 실증연구

This study examines the monthly real house price index movements over the period 1986-2023 using the GSADF method to determine whether bubbles existed in the Korean housing market, where they occurred, when they occurred, and how long they lasted by housing type (total, apartment, detached house, and townhouse). We summarise the main findings from our empirical analysis as follows. First, there were multiple bubbles in housing prices across the nationwide, Seoul, and all provincial metropolitan areas. However, there are many differences in how bubbles occurred across regions and types of housing. Second, the post-bubble period lasted much longer in the detached house market than in the apartment and row house markets. Third, many housing market bubbles occurred during periods of abundant liquidity. Fourth, while most bubbles are positive, appearing during periods of rapid house price appreciation, negative bubbles appeared in some areas (Busan, Gwangju, and Ulsan) during the 1998 Asian financial crisis. Fifth, the detached house markets in Busan and Ulsan are found to be bubbling at the end of the sample (December 2023). These results suggest that the GSADF test can not only detect historical bubble periods, but can also detect bubbles in real time, providing early warning of bubbles.

Predicting the longitudinal patterns of housing affordability stress: Evidence from the Korea Welfare Panel Study

As housing costs increase faster than salary and wage growth worldwide, housing affordability stress (HAS) becomes an increasingly crucial urban problem. However, little evidence exists on under what preconditions HAS experiences are likely to be persistent. This study examines the predictors of chronic forms of HAS experiences in the Korean housing market, characterized by a unique tenure system represented by Jeonse renting (i.e., renting only with a security deposit) and severe regional disparities between the Capital region and the rest of the country. After classifying the longitudinal patterns of HAS between 2011 and 2020, we examine under which preconditions between 2007 and 2010 households were likely to experience chronic forms of HAS. The results reveal that certain combinations of household income, housing tenure choice, and location of residence significantly heighten the probability of experiencing chronic forms of HAS. This study contributes to the literature by highlighting the importance of the longitudinal view of HAS experiences and expanding knowledge about the potential mechanisms that drive chronic forms of HAS.

Are There Housing Bubbles in Seoul Metropolitan Areas?: Evidence from Right-Tailed Unit Root Test

This study examines the explosive behaviors of house prices in Seoul and its metropolitan areas during 2008Q1~2023Q1. In order for the relationship between house prices and cash flows to reflect better the Korean housing market, this study adopts price-to-income ratio, real transaction-based house prices and personal income. Based on the generalized supremum ADF (GSADF) test, our empirical findings show that housing bubbles are identified in all three markets. According to the starting period, duration periods, and magnitude and prominent peaks among GSADF statistics, the bubbles in Seoul housing market appear to be most serious and further be transmitted to the housing markets of its metropolitan area, Incheon and Gyeonggi-do. Since the methodology used in this study provides policy-makers and investors with real-time information on bubbles, they could formulate a better early warning system to tackle the bubble problem. Specially, our empirical finding helps policy makers to prioritize Seoul over the other housing markets to cope with ongoing bubbles.

Predicting the Non-Return of Chonsei Lease Deposits in the Republic of Korea

Chonsei, a Korean housing lease system, enables landlords to acquire direct housing purchase funds without mortgages and offers tenants a cost-effective rental option. However, public concerns have arisen about potential landlord defaults, causing financial distress for tenants. This study examined the risk of non-return of the Chonsei deposit and developed a default prediction model using Chonsei contract data from the Korea Housing and Urban Guarantee Corporation. Starting with the components from Merton’s bond pricing model, we included variables that reflect contract-specific factors, macroeconomic conditions, and the Korean Chonsei practices. The findings revealed that higher house price volatility, elevated debt-to-house value, and risk-free interest rates positively correlate with non-return risk. Meanwhile, certain factors, such as longer remaining maturity, favorable macroeconomic conditions, and rising market Chonsei price trends, demonstrated negative correlations with non-return risk. Consequently, a logistic regression-based default prediction model, with eight risk factors that predict the deposit non-return, was suggested. By identifying risk factors and predicting the non-return risk of deposits, this study contributes to an informed policy decision in planning and practicing Chonsei contracts in the Korean housing market.

주택시장 매칭모형과 금융비용 충격의 동태적 효과

I build up a dynamic search-matching model in both the housing and financial markets in which housing construction is characterized by time-to-build. I calibrate the model to match the key features of the Korean housing market. I examine the dynamic effects of a cost shock that affects the financial institutions issuing loans. An increase in financial costs reduces the financiers’ entry and the home-buyer’s probability of obtaining a loan. Since the value from owning a home tends to decrease while the value from renting a home tends to increase, the number of home buyers falls. Therefore, home prices and sales volume decrease.

Cross-Regional Asymmetric Volatility Connectedness in the Korean Housing Markets

This paper investigates asymmetries in the volatility connectedness of the Korean housing market. For this purpose, we employ the asymmetric connectedness approach proposed by Baruink et al.(2017). While the analysis of Baruink et al.(2017) is based on low dimensional VAR model, we consider 16 regional markets, by using high dimensional LASSO-VAR model. The main results are as follows. First, the total CAM(connectedness asymmetric measure) is estimated at 27.08%, indicating a high asymmetry in the housing market. In particular, the impact of good volatility strictly dominates that of bad volatility. Second, the total CAM shows time-varying patterns, with a surge in December 2020. Third, the contribution of Seoul to the aggregate housing market had gradually decreased since 2010 but started to rise again in 2017. The findings of this study suggest that macroprudential policy instruments are necessary to stabilize the housing market in the face of the recent accumulation of financial imbalance risks.

전월세시장의 구조적 변화*

The Korean housing market is unique in the sense that there are a variety of rental contracts composed of a mix of chonsei and wolsei. Previous studies have reported that housing markets experience structural breaks, wherein the market

기계학습 기반 주택시장의 조기경보체계*

This study proposes an early warning system for risks of the housing market based on machine learning models. We adopt a signal approach to detect the housing market risk and establish the early warning system using classification methods. Considering the moment when the housing market falls into recession as a warning signal, we set the signal as the price which is more than the sum of the average and standard deviation of upcoming prices. The detected signals are consistent with empirical observations in the Korean housing market. We select the best performing function among classification models for machine learning which predicts a warning signal. As a result of an intercomparison of models including the logistic regression, the support vector machine, the random forest and the artificial neural network with the use of inputs such as housing price indices, macroeconomic variables and other housing market variables, we find that the random forest demonstrates the highest prediction performance. Our early warning system yields policy implications in terms of relevant detection of price fluctuations in the housing market.

Statistical property of record breaking events in the Korean housing market

We study the record statistics in the Korean housing market. To characterize the statistical properties of records, we analyze the record rate and the expected number of records for the transaction price of apartments and the volatility. From the numerical analysis, we find that the record rate of price in the overheated region is well described by the record rate obtained from the symmetric independent and identically distributed (IID) random sequence when the price change is relatively small. On the other hand, during the period for the subprime mortgage crisis, the record rate of price in the overheated regions is well approximated by that for the correlated sequence. More interestingly, when the price continuously increases the record rate of price shows a strong seasonal effect in the overheated region, while that in the normal region is simply described by the symmetric IID random sequence with constant drift on the average.

Is the Korean housing market following Gangnam style?

Gangnam is a prime district in Korea known for its expensive real estate market due to convenient transportation, shopping and business centers, and elite schools and academies in the area. This paper examines spillovers and network connectedness in the Korean regional markets using the spillover index of Diebold and Yilmaz (J Econom 182:119–134, 2014). We use the quantile regression approach to investigate the macroeconomic factors driving the total spillover effects under low, normal, and high spillovers. We find that the 1997–1998 Asian currency crisis intensified regional spillovers in the Korean housing market. Moreover, Gangnam is the largest transmitter of spillovers across the regional housing markets in Korea. Our visual network illustrates that Gangnam is a hub of connectedness, implying that it is the most influential shock transmitter among the regional housing markets. Our study has an implication for investors: macroeconomic factors affect spillovers across regional housing sales and rental markets under different degrees of spillover.

Neighborhood effects of housing program using Jeonse in Korea

Purpose This study aims to introduce the Youth Jeonse Rental Housing Program using the unique characteristics of the Korean housing market to explain its theoretical value in the current theoretical landscape of public housing and to identify the effect of the program on the regional housing price. Design/methodology/approach This study uses three hedonic price models on the basis of Korea’s housing market, namely, own, jeonse and rent models. Moreover, it uses the hierarchical linear model to include both house- and region-level variables. Findings Analysis shows that youth rental housing has no effect on falling prices in the region unlike long-term rental housing. Thus, the policies using regional tenure system are more effective in the social mix than existing public housing policies. Originality/value This study introduces the program using Korea’s unique tenure system called jeonse, arguing its advantages for the supplier, recipients and regional neighborhoods. Suppliers can easily provide affordable housing at a low economic and administrative cost, whereas recipients can easily mix socially, have broad housing choices and a fighting chance for a stable life. Additionally, this policy has a low negative impact on the region. Furthermore, this study theoretically presents the potential for mixed paths other than demand or supply policies. It introduces and analyzes special policy objectives for youth housing problems.

주택공급변동성과 준공후미분양 결정 요인 분석*

One of the main characteristics of Korean housing supply is that it shows high volatility by repeating the rapid supply spike periodically by increasing the amount of pre-sale apartments. In general, this surge in housing supply was a major burden for the construction industry and the economy. This study demonstrates that if the pre-sale volume increases by 10% this year, the unsold new housing volume after completion will increase from 1.87% to 1.99% in three years. In other words, the increase in volatility in housing supply through a surge in pre-sale volume leads to an increase in unsold new housing volume after completion, and the data confirm the burden on the construction industry. The study also shows that coordination failures can lead to a rapid housing supply surges in the Korean housing market. Therefore, institutional supplementation is needed to prevent such a coordination failure from appearing in the market. This study suggests that the decrease of housing supply volatility and the reduction of unsold new housing after completion will require the increase in the share of construction companies’ equity capital and the gradual implementation of the post-sale housing supply system.

Behavioural biases and nonlinear adjustment: evidence from the housing market

ABSTRACT Using the threshold vector error correction model, this study finds substantial evidence for asymmetric mean-aversion in the Korean housing market, arising from behavioural biases. In order to effectively capture behavioural biases from the prospect theory, special attention is paid to the extreme tails of price deviations from long-run rationality. The major findings are highly consistent with the prospect theory predicting the risk-aversion effect after prior losses and the house money effect after prior gains. The overall speed of adjustment at losses is assessed about 7 times as high as at gains. The evidence that price changes are serially dependent, even after controlling the behavioural biases, suggests that house prices are also driven by investors’ extrapolative expectation.

경제정책 불확실성과 주택가격 변동률 간 연계성 분석

경제정책 불확실성과 주택가격 변동률 간 연계성 분석

Housing Market Agent-Based Simulation with Loan-To-Value and Debt-To-Income

This paper introduces an agent-based model of a housing market with macro-prudential policy experiments. Specifically, the simulation model is used to examine the effects of a policy setting on loan-to-value (LTV) and debt-to-income (DTI), which are policy instruments several governments use to regulate the housing market. The simulation model illustrates the interactions among the households, the house suppliers, and the real estate brokers. We model each household in the population as either seller or buyer, and some of households may behave as speculators in the housing market. To better understand the impact of the policies, we used the real-world observations from the Korean housing market, which include various economic conditions, policy variables, and Korean census data. Our baseline model is quantitatively validated to the price index and the transaction volume of the past Korean housing market. After validation, we show the empirical effectiveness of setting LTV and DTI towards house prices, transaction volumes, and the amount of households' mortgages. Furthermore, we investigate the simulation results for the owner-occupier rate of households. These investigations provide the policy analyses in Korea's housing market, and other governments with LTV and DTI regulations.

한국 주택시장의 거품 검정과 주택시장 정책

한국 주택시장의 거품 검정과 주택시장 정책

Changes in the Comovement of House Price and Jeonse Price in the Korean Housing Market Considering the Macroeconomic Factors

본 연구는 우리나라의 소규모 개방경제인 특성을 고려하여 통화정책과 거시경제변수들이 주택가격과 전세가격 간에 동조화 현상에 동태적으로 어떤 영향을 미치는가를 분석한 다. 이를 위해 미국연방자금금리(FFR)를 블록외생성(Block Exogenous)를 가정한 SVAR (1)모형을 설정하여 주택가격과 전세가격의 동조화 현상을 동태적으로 살펴보았다. 먼저 CD금리, 산업생산지수, 소비자물가지수 등의 요인이 주택과 전세가격에 미치는 동시기 인과관계를 살펴보면, 주택가격은 산업생산지수와 전세가격이 증가하면 함께 증가하는 것으로 나타났으며, 전세가격은 CD금리, 산업생산지수, 소비자물가지수, 주택가격이 증가하면 함께 증가하는 것으로 나타났다. 한편 충격반응의 결과를 살펴보면, 주택가격은 국내외 금리의 1% 상승충격이 발생하면 감소하지만, 전세가격은 증가한다. 주택가격은 산업 생산지수의 1% 상승충격, 전세가격은 소비자물가지수의 1% 상승충격에 더 민감하게 증가 하는 것으로 확인된다. 하지만 이런 관계의 영향력은 시간의 흐름에 따라 최근 약화되는 추세를 보인다. 마지막으로 주택가격과 전세가격 간의 동조화 현상을 살펴보면, 동시기적으로 주택가격에 대한 전세가격의 동조화는 국내외 금리, 경기요인 등의 영향보다 주택가격 변화가 미치는 영향이 크며, 전세가격에 대한 주택가격의 동조화는 금리변화, 경기변화에 민감하게 반응한다.This study investigates the change of comovement between the house price and the rent price (hereafter Jeonse price). The methodology used in this study is the SVAR (1) model that assumes the US federal funds rate (FFR) to be block exogenous, and dynamically examines the comovement of the house price and the Jeonse price in the Korean housing market from 2004 to 2018. The main results are as follows. First, we found that the increase in house price is related to the increase in the industrial production index (IPI) and Jeonse price. We also found that the increase in Jeonse price is associated with the increase in the interest rate, IPI, consumer price index (CPI), and house price. Meanwhile, we find that the house price decreases in the 1% upward pressure of domestic and foreign interest rate shock. However, Jeonse price is only influenced by the domestic interest rate shock. It is noted that the increase of IPI and CPI commonly affects both the house price and the Jeonse price. Second, we carried out a rolling regression analysis in order to identify the dynamic casual relationship. We find that the impact of house price and Jeonse price from the IPI and CPI decrease as the interest rate goes up in the global financial market. Finally, we analyze the comovement between the house price and the Jeonse price. We find that the comovement of Jeonse price on the house price is significantly influenced by the change of Jeonse price rather than economic factors, such as interest rate. However, the result shows asymmetry in the house price. The comovement of the house price in relation to the Jeonse price is further influenced by the change of interest rate or economic conditions.

Cross-regional connectedness in the Korean housing market

This paper investigates the network topology of the Korean housing market using the connectedness methodology. The basic finding is that, among various combinations of regional housing markets, Seoul has been the most influential market in Korea. We also present evidence that other metropolitan cities affect only the neighboring regions. As for the results from the rolling-sample analysis, the net directional connectedness of Seoul appears to have declined over the sample period. Although Seoul still remains the center of the Korean housing market, neighboring regions have become increasingly more influential in affecting other regional markets. These findings suggest that the policy for balanced national development might have changed the transmission mechanisms in the Korean housing market.

부호제약을 이용한 한국 주택시장의 변동요인 분석

부호제약을 이용한 한국 주택시장의 변동요인 분석

Apartment complexes in the Korean housing market: what are the benefits of agglomeration?

The Korean government has codified a unique set of regulations that requires developers to provide certain types and sizes of community and commercial facilities in proportion to the number of housing units in an apartment complex, given the lack of public funds necessary to create a livable and self-sufficient environment. To answer the question of why large-scale apartment complexes have been popular in the Korean housing market, this study illuminates the agglomeration benefits resulting from the integration of community and commercial facilities in apartment complexes. Using hedonic regressions and causal mediation analysis, it concludes that the agglomeration benefits of apartment complexes associated with an increase in the size of both community and commercial facilities outweigh the congestion diseconomies caused by an increase in the number of housing units. This implies that the government’s intervention has made large-scale development of residential areas financially feasible without the use of public expenditure.