Can government stabilize the housing market? The evidence from South Korea

Abstract

This study aims to examine the effectiveness of government policies in stabilizing the housing market in South Korea. Analysis of condominium prices between 2012 and 2019 in conjunction with housing policy and regime changes reveals that: (1) housing policies effectively restrained the rapid increase of housing prices; (2) market efficiency was also improved; and (3) finally, housing prices approached close to long-run equilibrium. Our findings strongly indicate that government policies can be effective tools to stabilize housing prices, as well as improve market conditions.