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Public Finance

Research Monograph

Strategy for East Asian Integration (Ⅲ): Deepening and Enlargement of Regional Cooperation and New Challenges

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  • Author Hongtack Chun, Myung-ho Park, Yeong-seop Rhee
  • Date 2012/12/31
  • Series No. Research Monograph 2012-11
  • Language Korean
SUMMARY Ⅰ. Purpose
Korea’s housing market in the 2000s has seen a couple of ongoing structural changes rendering the market framework. First, as chronic shortage of supply has been somewhat solved (at least on a nationwide basis), the expectation for a rise in house prices resulting from the mismatch between supply and demand is projected to weaken. Second, urban population which soared between 1970 and 1999 (40%→80%) posted little change at around 81% since 2000. Additionally, the scheduled relocation of government offices outside the capital region will lead to slowing the pace of concentration of population and economic activities in the capital region. Third, as the market for housing finance and real estate development financing grew, the role of institutional finance has increased. Accordingly, financial inclusion has broadened to cover more marginal borrowers, but at the same time the need to manage system risks—loan volatility spreading to macroeconomy—in an appropriate manner has risen as well. Fourth, changes in demographic and social structure resulting from low birth rate, population aging and small family trends have demanded a change in the types of housing. In the past, most of the supplied apartments were targeting a household with four members, but in the future, rental and self-owning houses will offer more variety in formats and styles. Lastly, the global financial crisis that started in the US and Europe between 2007 and 2009 has served as an opportunity for Korea to look back on issues and policies as to real estate market stabilization and housing welfare for mediumand low-income classes. This study aims to outline implications that the global financial crisis has brought to Korea’s housing sector which is presently undergoing several structural changes, such as reduced shortage of house supply, expanded institutional housing finance and changing demographics and social structures, and then to seek for a new paradigm for housing policy. The final paper includes 16 theses under six chapters including the introductory chapter, and its key policy implications are discussed under three categories below.
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