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Credit constraints and the temporal dynamics of the housing market: Evidence from Korea’s high-value mortgage ban

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  • Oh, Jiyoon

Abstract

How do housing markets respond when mortgage lending is abruptly prohibited above a price threshold, and how persistent are the resulting distortions? This paper exploits a sharp credit notch created by Korea’s December 2019 ban on mortgage lending for apartments priced at or above 1.5 billion KRW (approximately USD 1.3 million). Using administrative data on the universe of apartment transactions in Seoul and a bunching approach, the paper documents substantial excess mass just below the cutoff, far exceeding the missing mass above it, consistent with demand reshuffling rather than transaction suppression. This bunching response, however, declined by roughly two-thirds within two years, while transactions above the cutoff increased steadily over the same period. The findings suggest that sharp borrower-based credit restrictions can induce large short-run distortions, but that these effects may attenuate quickly as the market adjusts.

Suggested Citation

  • Oh, Jiyoon, 2026. "Credit constraints and the temporal dynamics of the housing market: Evidence from Korea’s high-value mortgage ban," Finance Research Letters, Elsevier, vol. 102(C).
    • Handle: RePEc:eee:finlet:v:102:y:2026:i:c:s1544612326006446
    DOI: 10.1016/j.frl.2026.110115
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    JEL classification:

    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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