House Price Dynamics with Household Debt: the Korean Case

Hyun Jeong Kim
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Hyun Jeong Kim: the Bank of Korea

No 868, 2013 Meeting Papers from Society for Economic Dynamics

Abstract: This paper revisits long-run determinants of house prices and analyzes the house price dynamics with the Korean data, while taking into account the close relationships between house prices and household debt. We also attempt to forecast trend house prices over the next five years. The result of cointegrating regressions shows that the rise in house prices during the 2000s in Korea was strongly related with the steep increase in household debt. And, as the estimated error correcting process reveals, the adjustment in house prices has been made gradually, as it takes about four years for the difference between actual and fundamental (long-run) house prices to be reduced by half. Finally, the mid-run house price forecast shows that house prices are not likely to rise as sharply as they did in the 2000s in near future, when considering the long-term changes in the macro-financial environment.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed013:868

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