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Which determines new housing supply? Demand versus Supply (in Korean)

Author

Listed:
  • Jiyoon Oh

    (oh.jiyoon@kdi.re.kr)

Abstract

This paper analyzes the determinants of Korean residential investment by dividing it into demand and supply using instrumental variable regressions. It turned out that housing prices reflecting demand pressure were the most important determinants of residential investment during the whole sample period (1988q1-2017q3). We add public supply of residential areas as an important policy variable. The effect of the public supply of housing sites on residential investment was large enough to reach about 80 percent of the impact of housing prices. The importance of demand and supply factors has varied significantly over the analysis period. Demand factor reflected in housing prices accounted for the major variations of residential investment in the preceding period (1988q1-2005q4), while supply factors such as construction costs, and public supply of residential areas were more significant in the later period (2006q1-2017q3). This result is additionally supported by the fact that correlation between residential investment and the relative price of residential investment turns into negative from positive in the latter phase.

Suggested Citation

  • Jiyoon Oh, 2018. "Which determines new housing supply? Demand versus Supply (in Korean)," Economic Analysis (Quarterly), Economic Research Institute, Bank of Korea, vol. 24(4), pages 71-100, December.
    • Handle: RePEc:bok:journl:v:24:y:2018:i:4:p:71-100
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    Cited by:

    1. Suh, Hyunduk, 2023. "Regionally heterogeneous housing cycles and housing market stabilization policies: Evidence from Korea," Economic Modelling, Elsevier, vol. 120(C).

    More about this item

    Keywords

    Determinants of Housing Supply; A public housing policy; The impact of housing supply to housing prices;
    All these keywords.

    JEL classification:

    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity

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