Korean Jeonse and Mortgage Market after Global Financial Crisis: An Aggregate and Micro-Level Analysis

53 Pages Posted: 26 Mar 2016

See all articles by Min Jeong Park

Min Jeong Park

Korea Advanced Institute of Science and Technology (KAIST)

Sunyoung Park

Korea Advanced Institute of Science and Technology (KAIST) - Department of Industrial and Systems Engineering

Date Written: March 24, 2016

Abstract

This paper empirically analyzes the market for Jeonse and housing finance in South Korea, from multiple angles. Jeonse, a unique lease contract in Korea, is essentially a repurchase agreement where the owner borrows from the tenant, with the house as collateral. As a lease contract for the tenent and a private loan contract to the owner at the same time, it is considered as bilateral collaterilization. Our research goal is to empirically analyze whether under-developed housing finance is partly attributable to the popularity of Jeonse or that the dominance of Jeonse has prevented mortgage market from developing. We also observe how their relationship changes after the 2008-09 global financial crises, using both macro- and micro-level data. Our dataset consists of Ministry of LIT's housing transaction data, hand-collected auction transaction data from 'GoodAuction', along with KB Housing indices and mortgage data from BOK. We answer the following questions: at the aggregate level, (1) determine the long run equilibrium relationship between Jeonse and mortgage market, using both static and dynamic approaches, and identify the short-run causality directions between Jeonse price and mortgage, at the micro-level (2) analyze the effects of mortgage and various other factors on Jeonse market's quantity (3) analyze the effects of mortgage and other factors on Jeonse market's price.

Keywords: Korea, Jeonse, mortgage, VECM, panel regression

Suggested Citation

Park, Min Jeong and Park, Sunyoung, Korean Jeonse and Mortgage Market after Global Financial Crisis: An Aggregate and Micro-Level Analysis (March 24, 2016). Available at SSRN: https://ssrn.com/abstract=2754425

Min Jeong Park (Contact Author)

Korea Advanced Institute of Science and Technology (KAIST) ( email )

373-1 Kusong-dong
Yuson-gu
Taejon 305-701, 130-722

Sunyoung Park

Korea Advanced Institute of Science and Technology (KAIST) - Department of Industrial and Systems Engineering ( email )

Daejeon
Korea, Republic of (South Korea)
82-42-350-3117 (Phone)

HOME PAGE: http://https://sites.google.com/site/sanovs/

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