The effects of spatially targeted housing policy: Evidence from land transaction permit system in South Korea

Geon Kim

No 7sf92, SocArXiv from Center for Open Science

Abstract: Since 2017, the surge in housing prices in South Korea has raised concerns about housing affordability and price bubbles. To dampen the escalating housing prices by regulating speculative demand, the land transaction permit (LTP) area is designated in the Gangnam area in Seoul. This policy represents one of the most stringent regulations because it imposes a mandatory two-year residency obligation, and transactions for those years are prohibited. This study examines the effects of LTP on sales and rental prices in Seoul, South Korea. Using the difference-in-differences method, I find that the LTP triggers up to a 7.7% decrease in sales prices, which is aligned with the policy’s aim. However, the LTP also raises rental prices as well as both sales and rental prices in the surrounding area, which are undesirable and unintended outcomes of the policy from a broader real estate market perspective.

Date: 2024-01-11
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Persistent link: https://EconPapers.repec.org/RePEc:osf:socarx:7sf92

DOI: 10.31219/osf.io/7sf92

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