Recently the change of real estate investment has appeared because of the depression of real estate market and lowering of interest rate. In a property boom before worldwide financial crisis, rate of return for residential properties(mainly apartments...
Recently the change of real estate investment has appeared because of the depression of real estate market and lowering of interest rate. In a property boom before worldwide financial crisis, rate of return for residential properties(mainly apartments) investment is very high. After 2008 financial crisis, a drop in price and trading volume has occurred. Especially, a fall in price for large size apartments is larger than that for medium or small size apartments. Chonsei price for apartments has increased sharply and the housing market in Korea tends to change into a rental market. This phenomenon, already occurred in developed countries, means that residential property market can be transferred to be similar to commercial property market(mainly office) which is a profitable real estate market. For the analysis of such changes of real estate market, the study from the connection between the two property markets, namely residental and commercial, is needed. But the previous studies has treated the two property markets as being separate.
This study aims at comparing with the two property markets from the analysis considering the effect of dynamic macroeconomic variables and spatial effect by using the data about sales price and chonsei price of apartments and office rents in Seoul.
Before the analysis of the effect of dynamic macroeconomic variables on the two property markets, the correlation between the two markets is analyzed by Granger causality test and Geweke causality test. There is no causality between them unlike Hong Kong.
Granger causality test is performed in order to find influencing factors on the two property markets. While macroeconomic variables, such as production or income index and currency or financial index, have an influence on residential property market, economic activity index has an influence on commercial property market. There is a difference in influencing factors on each real estate market between the two markets.
Spatial econometrics models are used for analyzing the hedonic model including spatial effects. Qualitative analysis has been carried out by GIS from the Geo-coding process of the information about apartments and offices. Moran's I index is also calculated for diagnosing the existence of spatial autocorrelation for dependent variables. All Moran's I indicies of sales price and chonsei price of apartments and office rents in Seoul are larger than 0.5
In order to select the proper spatial econometrics model, the test for the presence of spatial autocorrelation in the regression residuals is performed. Except for the rents for prime office building, the presence of spatial autocorrelation is observed in all cases. From the robust-LM test results, it is concluded that spatial lag model using spatial weight matrix having the form of inverse distance squared is valid for analysis.
Spatial autocorrelation parameter estimated by using spatial lag model is statistically significant in all cases. It means that there is a substantive spatial dependence for sales price and chonsei price of apartments and office rents in Seoul. Therefore, it may be the reason for the regional separation in price or rents.
For the analysis of correlation between regional separation in price and real estate market, the change of spatial autocorrelation parameter is compared with that of real estate market. As for residential properties, the change of spatial autocorrelation parameter is similar to that of real estate market. But there is no correlation for commercial properties.
Spatial autocorrelation parameter estimated using sales price and chonsei price of apartments with living area of 102.3m2∼ 112.2m2 in Seoul has increased sharply after 2008, whereas that of living area of above 148.5m2 has not. It means that the phenomenon of regional separation in price for housing market in Seoul becomes more intensive after 2008 in the apartments with living area of 102.3m2∼ 112.2m2 representing small or medium size.
It is known that the real estate market in Seoul has changed sharply after 2008 worldwide financial crisis. Because of a rapid decrease in population and the trend of the nuclearization of families which has been before, people have preferred a small or medium size apartments, especially after 2008.
This study claims different significance and differentiation from the previous studies in that it compares residential property market with commercial property market in time and space and proposes a tool for analysis of real estate market.