The Korean Economic Forum
Regional Diffusion and Structural Changes in Apartment Price Fluctuations
Hongjai Rhee (Ajou University)Year 2023Vol. 16No. 3
AbstractThis study analyzes the regional diffusion pattern of fluctuations in domestic apartment transaction prices from 2010 to 2022. The distinctive features of this research compared to previous literature are as follows: (1) The sample is divided into two periods, and possible structural changes in the process of how apartment transaction price fluctuations in the Seoul area, particularly by Gangnam-gu, spread to other regions are analyzed. (2) To mitigate the issues of index integration and multicollinearity, the nationwide apartment market is divided into 19 regional markets based on the correlation of price indices time series and geographical proximity. Then, representative time series for each region are extracted to estimate the VAR (Vector Autoregression) models. The main results indicate that before 2016, the shock of Gangnam-gu’s price index had an overwhelmingly high, widespread, and statistically significant effect on other time series nationwide. However, after 2016, the magnitude and scope of this effect rapidly decreased. These findings support the hypothesis of structural changes, and this study establishes and interprets the hypothesis within an integrated framework of inter-regional substitutability.