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Housing speculation and housing price bubble in Korea

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Frame of Image onding ratios in advanced countries. To make the matter worse, the housing price continues to rise rapidly; in large cities including Seoul; it has been increasing by more twenty per cent per year lately. The excessively high housing price means worsening housing affordability, higher wage rate and worker's weakening desire to work. It is a common belief in Korea that the chief reason for such a high housing price is speculation and the government has applied a series of anti-speculative measures including major increase in capital gains tax and property tax. However, these measures have not produced the expected results. Another controversial issue has been the presence of bubbles in housing price and its impact on the economy. It goes without saying that the bubble is caused by speculative activities.
1) Distinguished visiting professor, KDI School of Public Policy and Management, Chongyangri-Dong, Dongdaemun-Ku, Seoul, Korea 130-868. Tel:(+82-2)3299-1031, fax:(+82-2) 3299-1053, e-mail: jhsch@kdischool.ac.kr
2) Visiting professor, KDI School of Public Policy and Management, Chongyangri-Dong, Dongdaemun-Ku, Seoul, Korea 130-868. Tel:(+82-2) 3299-1018, fax:(+82-2) 968-5072, e-mail: jhkim@kdischool.ac.kr
This paper is designed on one hand to evaluate the contribution of speculative activities to housing price hike and, on the other to verify the presence of bubble in housing price. In order to quantify the impact of speculation on housing price, a simple devise is applied; the


Full Text
Title Housing speculation and housing price bubble in Korea
Similar Titles
Material Type Reports
Author(English)

Chung, Hee Soo; Kim, Jeong Ho; Kwon, Hyuk Il

Publisher

[Seoul]:KDI school of Public Policy and Management

Date 2004
Series Title; No Working papers
Pages 30
Subject Country South Korea(Asia and Pacific)
Language English
File Type Documents
Original Format pdf
Subject Territorial Development < General
Holding KDI school of Public Policy and Management

Abstract

One of the major social and economic problems in Korea in recent years
has been and is the sustained housing price spiral, especially since 2000. In
Seoul, the ratio of housing price to household annual income is about 10 times.
This is three or four times higher than the corresponding ratios in advanced
countries. To make the matter worse, the housing price continues to rise rapidly;
in large cities including Seoul; it has been increasing by more twenty per cent
per year lately. The excessively high housing price means worsening housing
affordability, higher wage rate and worker's weakening desire to work. It is a
common belief in Korea that the chief reason for such a high housing price is
speculation and the government has applied a series of anti-speculative measures
including major increase in capital gains tax and property tax. However, these
measures have not produced the expected results. Another controversial issue has
been the presence of bubbles in housing price and its impact on the economy. It
goes without saying that the bubble is caused by speculative activities.