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Seoul housing prices and the role of speculation

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Abstract

Between June 1998 and March 2006, the price index of apartment houses in Seoul, Korea, more than doubled, while fundamentals such as GDP, wage, and population increased by less than 35%. This study examines the role of a rational speculative bubble in this price surge. We find that unobservable information explains part of the price volatility; and that a rational bubble proxy is a significant driver of prices. However, neither latent information nor rational bubble is enough to explain the recent housing price appreciation, even in conjunction with observable fundamentals.

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Authors and Affiliations

  1. University of Aberdeen Business School, Edward Wright Building, Dunbar Street, Old Aberdeen, AB24 3QY, UK

    Qin Xiao

  2. Economics and Research Department, Asian Development Bank, Manila, Philippines

    Donghyun Park

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  1. Qin Xiao
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  2. Donghyun Park
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Correspondence to Qin Xiao.

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Xiao, Q., Park, D. Seoul housing prices and the role of speculation. Empir Econ 38, 619–644 (2010). https://doi.org/10.1007/s00181-009-0282-x

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  • DOI: https://doi.org/10.1007/s00181-009-0282-x

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