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Housing Prices and the Role of Speculation: The Case of Seoul

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  • Park, Donghyun

    (Asian Development Bank)

  • Xiao, Qin

    (University of Aberdeen)

Abstract

Between June 1998 and March 2006, the price index of apartment housing in Seoul, Republic of Korea, more than doubled, while fundamentals such as gross domestic product, wage, and population increased by less than 35%. This study examines the role of a rational speculative bubble in this price surge. We find that unobservable information explains part of the price volatility, and that a rational bubble proxy is a significant driver of prices. However, neither latent information nor rational bubble is enough to explain the recent housing price appreciation, even in conjunction with observable fundamentals.

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Bibliographic Info

Paper provided by Asian Development Bank in its series ADB Economics Working Paper Series with number 146.

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Length: 36 pages
Date of creation: Jan 2009
Date of revision:
Handle: RePEc:ris:adbewp:0146

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Related research

Keywords: Speculative bubble; latent information; housing market;

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  1. Kicki Björklund & Bo Söderberg, 1999. "Property Cycles, Speculative Bubbles and the Gross Income Multiplier," Journal of Real Estate Research, American Real Estate Society, American Real Estate Society, vol. 18(1), pages 151-174.
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  15. Kim, Kyung-Hwan, 1993. "Housing Prices, Affordability, and Government Policy in Korea," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 6(1), pages 55-71, January.
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