Examining Price Changes in Apartments in Seoul

During President Moon’s 5-year term, housing prices in Seoul increased by 62%, leading to widespread public uproar and ultimately his removal from office. Many factors have been proposed as potential explanations including speculation, the pandemic, excessive global liquidity, household debt, insufficient housing supply, and the government’s frequent policy interventions in the market. We simulate the impact of government factors on housing prices, considering them as exogenous variables (regime factor) and endogenous variables (policy interventions). In addition to the pandemic-induced price hike, most price increases under the Moon administration can be attributed to government factors. In May 2022, the conservative government succeeded the Moon government, leading to a rapid mean reversion of the house price to the long-run price.