Seoul, Korea / Housing

The housing market is a major factor in both individual decision-making and national fiscal policy, often accounting for over 30% of the economy in many countries. According to the World Bank, housing is the largest component of world wealth. Changes in the housing market can influence and be influenced by macroeconomic factors such as household incomes, interest rates, and the scale of private consumption and investment. The housing market in South Korea is no exception: housing stock was estimated to be 36% of the total capital stock market in 1996 and during the three decades from 1970, residential investment in South Korea was 5.6% of the gross domestic product (GDP) and 21.1% of total investment, comparable to the world averages of 5.5 and 23.4%. The average annual growth rate in housing investment was 9.1% which was higher than the average GDP growth rate (7.3%) during the same period. My project is an empirical case study of the determinants of property prices in Seoul, South Korea, a city that has experienced rapid economic growth, urbanization, increasing household affluence, and accelerated middle-class formation. Because of a strong desire for home ownership combined with the intense pressure on land and the enormous concentration of population in the metropolitan area, housing supply has been focused on the construction of tall apartment complexes rather than single-family dwellings. As a result, the apartment housing market has steadily expanded and that of detached housing has shrunk. Since 2010, apartments have been the dominant housing type for the 10.4 million inhabitants of Seoul.

This project investigates both spatial and temporal elements of the apartment pricing process in Seoul, South Korea by modeling the determinants of apartment prices over a ten-year period from 2006 to 2015 with a hedonic price model containing a spatio-temporal lag model calibrated by geographically weighted regression (GWR). The results yield information on both spatial and temporal variations in the processes affecting apartment prices and demonstrate the use of GWR for generating local spatial dependency measures which are conditioned on various covariates rather than being simple descriptions of pattern. The study utilizes a combined approach to account for both spatial dependency in housing prices and spatial heterogeneity in the processes generating those prices. The results suggest that there are spatial variations in the determinants of apartment prices and that these spatial variations are fairly consistent over time. The effect of the spatial lag on house prices exhibits strong spatial variation which again is reasonably consistent over time.

The outcome of this project has been published in "Applied Spatial Analysis and Policy" under the title Localized Spatiotemporal Effects in the Determinants of Property Prices: A Case Study of Seoul.