Year of Publication

2014

College

Martin School of Public Policy and Administration

Committee Member

Dr. J. S. Butler

Committee Member

Dr. Nicolai Petrovsky

Executive Summary

The South Korean government has been intervening in the housing market for a long time to either activate or stabilize housing prices. However, there is a controversy about the effect of housing policy in South Korea. I analyzed the effect of housing policies as well as other factor s (interest rate, cost of renting, inflation, stock price, unemployment rate, exchange rate) on housing prices nationally as well as in northern Seoul and in southern Seoul, from January 2000 to January 2015 (181 months of data).

According to the results of my regression analysis to test the effect of housing policies, there is no statistical evidence that housing policies have effects on housing prices. The pattern is the same across all three estimation s (national, northern Seoul, southern Seoul). The attempt of the South Korean government to cool the overheated housing market never seems to have the desired negative effect. The efforts of the South Korean government to heat the depressed housing market never seems to have the intended positive effect, either. This research finds no useful effect of these policies.

Looking at other factors, the results are very similar across all three estimations (national, northern Seoul, southern Seoul). The cost of renting has a large, statistically significant positive effect in all cases. The unemployment rate has a large, statistically significant negative effect nationally. Both effects are larger in southern Seoul than in northern Seoul. The interest rate matters only in northern Seoul, while the stock prices matter only in southern Seoul. Less wealthy people live in northern Seoul, whereas wealthier people live in southern Seoul. Interest rates matter more to the former and stock prices matter more to the latter.

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