Good Housing Booms, Bad Housing Booms:High-frequency Identification of Housing Speculation and Its Macroeconomic Consequences

Sangyup Choi and Junghyuk Lee
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Sangyup Choi: Yonsei University

No 2025rwp-275, Working papers from Yonsei University, Yonsei Economics Research Institute

Abstract: Leveraging Korea's unique jeonse system-a lump-sum lease arrangement that enables inference of intrinsic housing values—and urban district-level monthly-frequency data, this paper proposes a novel method to decompose housing price fluctuations into supply, residential demand, and speculative demand shocks. We find speculative demand accounts for nearly 50% of cumulative housing price growth in Korea and over 60%in the Seoul metropolitan area. Importantly, housing booms driven by residential demand increase regional consumption, employment, and output (“good booms†), while those driven by speculation reduce them ("bad booms"). Using comprehensive quarterly individual panel data, we show that only speculative demand shocks trigger excessive household leverage, creating a debt overhang that explains these differential aggregate effects. While monetary easing significantly amplifies speculative demand, an equivalent tightening fails to produce a comparable contraction. Conversely, macroprudential tools-such as lower loan-to-value limits-curb speculative surges more effectively, yet they also risk dampening residential demand.

Keywords: House prices; Good booms and bad booms; High-frequency identification; Sign-restriction approach; Jeonse; Debt overhang; Policy mix (search for similar items in EconPapers)
JEL-codes: E50 G10 R21 R30 (search for similar items in EconPapers)
Pages: 79pages
Date: 2026-01
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