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Place-based policy and spillovers in the housing market

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  • Kim, Hayoung

Abstract

In response to soaring housing prices during the COVID-19 pandemic, some governments imposed bans on investor purchases in hot housing markets, raising concerns that such place-based regulations would shift investment demand to adjacent, non-regulated areas. This study examines a ban on rental-purpose purchases in South Korea and finds that the regulation leads to price declines in both regulated and adjacent areas, demonstrating a price spillover effect: an 8.9 % decrease in the regulated area and a 5.2 % decrease in adjacent areas. Moreover, there is no statistical evidence of demand displacement or increased transaction volumes in adjacent areas, while the investor ban is associated with a 25.6 % decline in transaction volumes within the regulated zone. These findings suggest that price spillover effects outweigh displacement effects in heated housing markets, indicating that place-based policies can effectively curb real estate price increases despite concerns about investment demand displacement.

Suggested Citation

  • Kim, Hayoung, 2025. "Place-based policy and spillovers in the housing market," Economics Letters, Elsevier, vol. 248(C).
    • Handle: RePEc:eee:ecolet:v:248:y:2025:i:c:s0165176525000795
    DOI: 10.1016/j.econlet.2025.112242
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    References listed on IDEAS

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    1. Cameron,A. Colin & Trivedi,Pravin K., 2013. "Regression Analysis of Count Data," Cambridge Books, Cambridge University Press, number 9781107667273, June.
    2. repec:bla:jfinan:v:44:y:1989:i:3:p:719-29 is not listed on IDEAS
    3. Robert J. Shiller, 1989. "Comovements in Stock Prices and Comovements in Dividends," Journal of Finance, American Finance Association, vol. 44(3), pages 719-729, July.
    4. repec:bla:jfinan:v:44:y:1989:i:3:p:719-730 is not listed on IDEAS
    5. Somerville, Tsur & Wang, Long & Yang, Yang, 2020. "Using purchase restrictions to cool housing markets: A within-market analysis," Journal of Urban Economics, Elsevier, vol. 115(C).
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Place-based policy; Displacement of demand; Price spillover; Housing market;
    All these keywords.

    JEL classification:

    • D04 - Microeconomics - - General - - - Microeconomic Policy: Formulation; Implementation; Evaluation
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • G40 - Financial Economics - - Behavioral Finance - - - General
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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