6.6
Market Impacts of Housing Policies After Foreign Exchange and Financial Crisis
외환·금융위기 이후 주택정책의 시장파급효과 분석 연구(RR2000-9) Ju-Hyun Yoon and Hye-Seung Kim
2000. 10·148 pages·Korean
Background and Purpose
Foreign exchange and financial crisis burst out in Korea in the end of 1997, which resulted in high interest rate and credit crunch. Like other sectors in the Korean economy, the housing sector suffered from the financial crisis. Consumers experienced income reduction and unemployment. Home builders encountered difficulties in financing residential construction projects as a result of the cancellation of sales contracts and accumulation of unsold housing stock.
Transactions in the housing market rarely took place and the situation was exacerbated as home prices fell substantially.
In response to this, the government announced a series of policy measures from May 1998 to January 2000 in order to eliminate the difficulties of the housing sector. The purpose of each measure varied according to the confronting situation. In the very first stage, government strived to alleviate liquidity problem and to activate housing transactions. And then, it tried to promote housing construction by stimulating housing demand.
However, the high unemployment rate resulting from the restructuring process of the national economy and middle-class demolition resulting from the asset deflation came to be another issues. Thereupon, the government focused housing policy on the alleviation of housing problem for the low and middle class people. As a result, housing policy has much extended in the coverage as well as in the support scale.
This study aims to systematize these policy measures according to policy goals and methods in order to analyze the market effects of those measures, and to suggest policy improvements.
Major Areas of Analysis
Chapter 2 shows the market movements before and after the foreign exchange and financial crisis to give a general picture of the housing policies announced after the crisis. The three aspects of the housing sector such as housing demand, housing construction, and housing prices are reviewed. In chapter 3, the background of each policy is described. And then, the policy measures that were announced ten times over a period of two years after the crisis were systematized according to policy goals and methods. Policy goals are classified into three categories such as promotion of housing demand, alleviation of liquidity problem in housing construction, enlargement of public and private rental housing, boosting housing market and enlargement of housing finance.
And supporting methods are classified into deregulation, financial support, tax subsidies, etc.
In chapter 4, market impacts of these policy measures are analyzed through the comparison of the changes in the market situations and theoretical partial analysis for selective measures. There is a limitation that the phenomena revealed on the market could not be identified as the results of the housing policies. Moreover, it is very hard to separate each impact since too many policy measures were executed within a short period of time. Finally, based on the above evaluation of the policies, policy improvements are suggested in Chapter 5.
