Abstract for: Korean Real Estate Market Mechanisms and Deregulation of Mortgage Loans: Qualitative Analysis
The Korean real estate market is currently experiencing a slowdown due to the global economic crisis which has resulted from subprime mortgage lending practices. In response, the Korean government has enforced various policies, based on intention to deregulate real estate speculation, such as increasing the Loan to value ratio (LTV) in order to stimulate housing supply, demand and accompanying housing transactions. However, these policies have appeared to result in deep confusion in the Korean housing market. Furthermore, analyses for housing market forecasting—particularly those which examine the impact of the international financial crisis on the Korean real estate market—have been partial and fragmentary. Therefore, a comprehensive and systematical approach is required to analyze the real estate financial market and the causal nexus between market determining factors. Thus, with an integrated perspective and applying a system dynamics methodology, this paper proposes Korean Real Estate and Mortgage Market dynamics models based on the fundamental principles of housing markets, which are determined by supply and demand. As well, the potential effects of the Korean government’s deregulation policies are considered by focusing on the main factor of these policies: the mortgage loan.