Korean Real Estate Market and Boosting Policies: Focusing on Mortgage Loans

• Authors: Sungjoo Hwang , Moonseo Park , Hyun-Soo Lee , Yousang Yoon , Bo-Sik Son

Title variants

LT

Korėjos nekilnojamojo turto rinka ir staigaus pakilimo politika, paremta paskolomis

Abstracts

EN

The Korean real estate market is currently slowing down due to the global economic crisis, which resulted from subprime mortgage crisis in the United States. In response, the Korean government has adopted various policies in an attempt to deregulate real estate speculation. For example, the Loan to value ratio (LTV) has been increased in order to stimulate housing supply, demand, and housing transactions. However, these policies could potentially result in a mortgage crisis due to an increase in over-amplified and high-risk derivatives in Korea's secondary mortgage market. Consequently, the housing market could fall into such deep confusion that it will be even more difficult to perform empirically based housing market forecasting. Therefore, a comprehensive and systematic method is required to analyze the real estate financial market and the causal relationships between market influence factors. With an integrated perspective and an application of a system dynamics methodology, this paper proposes Korean Real Estate and Mortgage Market dynamics models based on the fundamental principles and causal loops of housing markets, which are determined by the economic activities of consumers, financial agencies, and real estate financing investors. The potential effects of the Korean government's deregulation policies are also considered by focusing on the main factor of these policies: the mortgage loan.

LT

Korėjos nekilnojamojo turto rinka šiuo metu išgyvena nuosmukį dėl pasaulinės ekonominės krizės, kuri kilo dėl JAV būsto paskolų rinkos krizės. Reaguodama į tai, Korėjos Vyriausybė ėmėsi įvairių politikos priemonių, siekdama užkirsti kelia nekilnojamojo turto spekuliacijai. Pavyzdžiui, buvo padidintas paskolos ir vertės santykis (angl. LTV), siekiant skatinti būsto pasiūlą, paklausą ir būsto sandorius. Tačiau šios politikos priemonės galėtų lemti būsto krizę dėl per daug išplėstos ir didelės rizikos išvestinėmis priemonėmis, didinant Korėjos antrinio būsto rinką. Tačiau būsto rinka gali atsidurti tokioje painioje situacijoje, kad bus dar sunkiau atlikti empiriškai pagrįstą būsto rinkos prognozę. Todėl reikalingas išsamus ir sisteminis metodas, padedantis analizuoti finansinę nekilnojamojo turto rinką ir priežastinį ryšį tarp rinką veikiančių veiksnių. Be integruotos perspektyvos ir dinamiško sistemingų metodų taikymo, šiame straipsnyje siūlomi Korėjos nekilnojamojo turto ir paskolų rinkos dinamikos modeliai, pagrįsti pagrindiniais principais ir pagrindinėmis nesėkmemis būsto rinkose, kurios nustatomos pagal ekonominę vartotojų veiklą, finansuojančias institucijas, ir nekilnojamajį turtą finansuojančiais investuotojais. Galimas Korėjos Vyriausybės pertvarkymo politikos rezultatas — sutelkti dėmesį į svarbiausią šių politikos krypčių rodiklį — būsto paskolas.

Keywords

EN

System dynamics; Real estate market; Mortgage loan; LTV

• Publisher: Sciendo
• Journal: International Journal of Strategic Property Management
• Year: 2010
• Volume: 14
• Issue: 2
• Pages: 157-172

Contributors

author

Sungjoo Hwang

• Department of Architecture, Seoul National University, San 56-1 Shillim-dong, Seoul, Korea

author

Moonseo Park

• Department of Architecture, Seoul National University, San 56-1 Shillim-dong, Seoul, Korea

author

Hyun-Soo Lee

• Department of Architecture, Seoul National University, San 56-1 Shillim-dong, Seoul, Korea

author

Yousang Yoon

• Lean Construction Research Center, San 56-1 Shinrim-Dong, Seoul, Korea

author

Bo-Sik Son

• Namseoul University, 21 MAE Seounghwan-eup, Seobuk-gu, Chonan, Korea

References

• Ahmad, S. and Simonovic, S. (2000) System dynamics modeling of reservoir operations for flood management,Journal of Computing in Civil Engineering-ASCE, 14(3), pp. 190-198. doi:10.1061/(ASCE)0887-3801(2000)14:3(190)
• Bernanke, B. (2008)Speech at the independent community bankers of America annual convention.[Online] Board of Governors of the Federal Reserve System, Orlando, Florida. Available at:http://www.federalreserve.gov/newsevents/speech/bernanke20080304a.htm
• Boone, L. and Kurtz, D. (2003)Contemporary business, South-Western/Thomson.
• Brueggeman, W. and Fisher, J. (2005)Real estate finance and investment, McGraw-Hill/Irwin.
• Cho, D. and Ma, S. (2006) Dynamic relationship between housing values and interest rates in the Korean housing market,Journal of Real Estate Finance and Economics, 32(2), pp. 169-184. doi:10.1007/s11146-006-6013-6
• Chomsisengphet, S. and Pennington-Cross, A. (2006) The evolution of the subprime mortgage market,Federal Reserve Bank of St. Louis Review, 88(1), pp. 31-56.
• Clauretie, T. M. and Sirmans, S. G. (2003)Real estate finance: theory and practice 4thedition, South-Western/Thomson Learning.
• Guirguis, H., Giannikos, C. and Anderson, R. (2005) The US housing market: asset pricing forecasts using time varying coefficients,Journal of Real Estate Finance and Economics, 30(1), pp. 33-53. doi:10.1007/s11146-004-4830-z
• Kim, C. and Kim, K. (1999) Expectation and housing price dynamics following deregulation in Korea,International Real Estate Review, 2(1), pp.126-142.
• Korea Appraisal Board (2008)Statistics.[Online] Korea Appraisal Board. Available at:http://www.ret.co.kr/
• Lander, G. H., Barker, K., Zabelina, M. and Williams, T. A. (2009) Subprime mortgage tremors: an international issue,International Advances in Economic Research, 15(1), pp. 1-16. doi:10.1007/s11294-008-9177-4
• Malpass, P. (1990)Reshaping housing policy: subsidies, rents and residualisation, London: Routledge.
• Park, M., Ahn, C., Lee, H. and Hwang, S. (2009) Analysis of the Korean housing market mechanisms and housing sales policies using system dynamics,Korean Journal of Construction Engineering and Management, 10(3), pp. 42-51.
• Park, S. W., Bahng, D. W. and Park, Y. W. (2000) Price run-up in housing markets, access to bank lending and house prices in Korea,Journal of Real Estate Finance and Economics, 40(3), pp. 332-367. doi:10.1007/s11146-008-9143-1
• Shiller, R. and Weiss, A. (1999) Evaluating real estate valuation systems,Journal of Real Estate Finance and Economics, 18(2), pp.147-161. doi:10.1023/A:1007756607862
• Sterman, J. (2000)Business dynamics: system thinking and modeling for a complex world, Boston: McGraw-Hill/Irwin.
• The Bank of Korea (2008)Statistics.[Online] The Bank of Korea. Available at:http://www.bok.or.kr/
• The KB Bank (2006)The present condition of house price in the country. Working paper.[Online] The KB Bank. Available at:http://land.kbstar.com/quics?asfilecode=5023&_nextPage=page=land&weblog=1_gnb_C0
• Zietz, J., Zietz, E. N. and Sirmans, S. G. (2008) Determinants of house price: a quantile regression approach,Journal of Real Estate Finance and Economics, 37(4), pp. 317-333. doi:10.1007/s11146-007-9053-7

Identifiers

DOI

10.3846/ijspm.2010.12