A Study on the Impact of Financial Regulation on the Relationship between Housing Demand and House Affordability

This paper analyzes the impact of financial regulation in housing markets in the case of financial regulations on the relationship between housing demand and house affordability with the micro-level data of 60,043 about 5,000 households every year for the survey of housing mortgages by the Korea Housing-Finance Corporation from 2011 to 2022. The results of its empirical analysis are as follows. Firstly, tenants are not willing to buy a house when purchasing prices rises over rental ones, whereas those who are willing to do raise the demand of purchasing a house. Secondly, the house affordability of young household heads continues to decline. In particular, the affordability in the future is much lower than the one in the present over other household heads. Thirdly, financial regulations have rapidly ascended since 2017 and the regulations for the future are heavier than the ones for the present. Finally, the weak housing affordability caused by financial regulations could reduce the demand of purchasing a house. The demand in the future in comparison with the present can often see the trend. In particular, the decline for the demand in the future is larger than the one in the present.