Expectation and Housing Price Dynamics Following Deregulation in Korea

Chung-Ho Kim () and Kyung-Hwan Kim ()
Additional contact information
Chung-Ho Kim: The Korean Center for Free Enterprise, Seoul, Korea, http://www.cfe.org
Kyung-Hwan Kim: Department of Economics, Sogang University, http://www.sogang.ac.kr/

International Real Estate Review, 1999, vol. 2, issue 1, 126-142

Abstract: This paper offers an explanation for the existence of price control on new houses in Korea, which is deemed both inefficient and inequitable. This phenomenon cannot be explained by the conventional model of rent-seeking or the capture theory of regulation. Instead, it is attributable to the popular belief that the removal of the price regulation will lead to the increase in the overall housing price by increasing the demand for existing houses that are a perfect substitute for new houses. However, the paper, using a stock-adjustment model of the housing market, demonstrates that the claimed outcome cannot materialize under perfect foresight or adaptive expectation. The outcome is possible in the short run under a peculiar expectation scheme of a self-fulfilling nature. But even in this case, the price increase will be a one-time event and in the long-run overall housing prices will fall below the level that would prevail if the price regulations were maintained.

Keywords: Price control; self-fulfilling expectation; short-term dynamics; Korea (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 1999
References: Add references at CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://www.gssinst.org/irer/wp-content/uploads/20 ... tion-and-Housing.pdf Full text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ire:issued:v:02:n:01:1999:p:126-142

Ordering information: This journal article can be ordered from
Global Social Science Institute, 9200 Corporate Blvd., Suite 420 Rockville, MD 20850
https://www.gssinst.org/gssinst/index.html

Access Statistics for this article

International Real Estate Review is currently edited by Professor Sing Tien Foo and Professor Ko Wang

More articles in International Real Estate Review from Global Social Science Institute Global Social Science Institute, 9200 Corporate Blvd., Suite 420 Rockville, MD 20850.
Bibliographic data for series maintained by IRER Graduate Assistant/Webmaster ().