Supply decision of existing apartment: Case study of apartment transactions in Gangdong district, Seoul, Korea
Abstract
Despite its importance, homeowners’ supply type decision has been under-researched due to data limitations. We construct a dataset of 4,037 apartment units in Gangdong district, Seoul, Korea over a 46-quarter period (2011Q1–2022Q2). We simultaneously analyse both the asset and space markets. The results show that the estimated probability and estimated volume of sale from supply type choice models are statistically significant in both the sales and rental price models. The key findings of our study are two. We find that the housing sales and rental markets interact and co-move together. We also demonstrate that the institution of the two-year lease contract period influences the transaction probabilities in both the sales and rental markets. For the supply type decision model, the estimated sale-transaction (rental-transaction) price significantly impacts the sale-transaction (rental-transaction) volume. However, no significant relationship was found between the estimated sale price and rental-transaction volume, nor between the estimated rental price and sale-transaction volume. The results of the forecast-performance comparison show that the integrated supply model_T/probability (calibrated) is the best for sales volume, whereas the two-year lagged value is the best for rental-volume estimation. This demonstrates institutional effects in the rental-housing market in Korea.
Keyword : existing apartment, apartment sales, lease, hedonic pricing model, panel multinomial logistic analysis, institutional effect
How to Cite
Lee, S., Shin, S., & Lee, Y. (2025). Supply decision of existing apartment: Case study of apartment transactions in Gangdong district, Seoul, Korea. International Journal of Strategic Property Management, 29(1), 16–34. https://doi.org/10.3846/ijspm.2025.23317
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Chung, E. (2002). Redevelopment and house prices: Expectations and realizations. Korea Real Estate Review, 12(2), 143–155.
Clapp, J. M., & Salavei, K. (2010). Hedonic pricing with redevelopment options: A new approach to estimating depreciation effects. Journal of Urban Economics, 67(3), 362–377. https://doi.org/10.1016/j.jue.2009.11.003
Clark, S., & Lomax, N. (2020). Rent/price ratio for English housing sub‐markets using matched sales and rental data. Area, 52(1), 136–147. https://doi.org/10.1111/area.12555
Clauretie, T., & Wolverton, M. (2006). Leave vacant or rent: The optimal decision for absentee home sellers. Journal of Real Estate Research, 28(1), 25–38. https://doi.org/10.1080/10835547.2006.12091172
Clayton, J., Miller, N., & Peng, L. (2010). Price-volume correlation in the housing market: Causality and co-movements. The Journal of Real Estate Finance and Economics, 40, 14–40. https://doi.org/10.1007/s11146-008-9128-0
Colwell, P. F. (2002). Tweaking the DiPasquale-wheaton model. Journal of Housing Economics, 11(1), 24–39. https://doi.org/10.1006/jhec.2001.0301
de Wit, E. R., Englund, P., & Francke, M. K. (2013). Price and transaction volume in the Dutch housing market. Regional Science and Urban Economics, 43(2), 220–241. https://doi.org/10.1016/j.regsciurbeco.2012.07.002
Depken, C. A., Hollans, H., & Swidler, S. (2009). An empirical analysis of residential property flipping. The Journal of Real Estate Finance and Economics, 39, 248–263. https://doi.org/10.1007/s11146-009-9181-3
DiPasquale, D. (1999). Why don’t we know more about housing supply? The Journal of Real Estate Finance and Economics, 18(1), 9–23. https://doi.org/10.1023/A:1007729227419
DiPasquale, D., & Wheaton, W. C. (1992). The markets for real estate assets and space: A conceptual framework. Real Estate Economics, 20(2), 181–198. https://doi.org/10.1111/1540-6229.00579
Ferreira, F., Gyourko, J., & Tracy, J. (2010). Housing busts and household mobility. Journal of Urban Economics, 68(1), 34–45. https://doi.org/10.1016/j.jue.2009.10.007
Follain, J. R., & Velz, O. T. (1995). Incorporating the number of existing home sales into a structural model of the market for owner-occupied housing. Journal of Housing Economics, 4(2), 93–117. https://doi.org/10.1006/jhec.1995.1005
Genesove, D., & Mayer, C. (2001). Loss aversion and seller behavior: Evidence from the housing market. The Quarterly Journal of Economics, 116(4), 1233–1260. https://doi.org/10.1162/003355301753265561
Genesove, D., & Mayer, C. J. (1994). Equity and time to sale in the real estate market (NBER Working Paper No. 4861). National Bureau of Economic Research. https://doi.org/10.3386/w4861
Hausman, J. A., & Taylor, W. E. (1981). Panel data and unobservable individual effects. Econometrica, 49(6), 1377–1398. https://doi.org/10.2307/1911406
Hausman, J., & McFadden, D. (1984). Specification tests for the multinomial logit model. Econometrica, 52(5), 1219–1240. https://doi.org/10.2307/1910997
Hort, K. (2000). Prices and turnover in the market for owner-occupied homes. Regional Science and Urban Economics, 30(1), 99–119. https://doi.org/10.1016/S0166-0462(99)00028-9
Huang, Y., Lieske, S. N., & Liu, Y. (2023). Factors influencing vertical urban development at the parcel scale: The case in Brisbane, Australia. Environment and Planning B: Urban Analytics and City Science, 50(3), 694–708. https://doi.org/10.1177/23998083221129283
LaCour-Little, M., & Yang, J. (2023). Seeking alpha in the housing market. The Journal of Real Estate Finance and Economics, 67(3), 319–374. https://doi.org/10.1007/s11146-021-09853-1
Lan, C. I. C., & Lee, C. J. (2020). Property-led renewal, state-induced rent gap, and the sociospatial unevenness of sustainable regeneration in Taipei. Housing Studies, 36(6), 843–866. https://doi.org/10.1080/02673037.2020.1720615
Lee, B. S., Chung, E. C., & Kim, Y. H. (2005). Dwelling age, redevelopment, and housing prices: The case of apartment complexes in Seoul. The Journal of Real Estate Finance and Economics, 30, 55–80. https://doi.org/10.1007/s11146-004-4831-y
Leung, C., Lau, G., & Leong, Y. (2002). Testing alternative theories of the property price-trading volume correlation. Journal of Real Estate Research, 23(3), 253–264. https://doi.org/10.1080/10835547.2002.12091081
Li, X., Han, S. S., & Wu, H. (2019). Urban consolidation, power relations, and dilapidated residential redevelopment in Mutoulong, Shenzhen, China. Urban Studies, 56(13), 2802–2819. https://doi.org/10.1177/0042098018799950
Loewenstein, L., & Willen, P. S. (2023). House prices and rents in the 21st century (No. w31013). National Bureau of Economic Research. https://doi.org/10.3386/w31013
Marlett, D. M. (1993). Causes of anxiety for transfer students: Implications for teachers. https://eric.ed.gov/?id=ED359162
Miceli, T. J., & Sirmans, C. F. (1999). Tenant turnover, rental contracts, and self-selection. Journal of Housing Economics, 8(4), 301–311. https://doi.org/10.1006/jhec.1999.0253
Miller, N., & Sklarz, M. (1986). A note on leaning indicators of housing market price trends. Journal of Real Estate Research, 1(1), 99–109. https://doi.org/10.1080/10835547.1986.12090516
Montgomery, C. (1992). Explaining home improvement in the context of household investment in residential housing. Journal of Urban Economics, 32(3), 326–350. https://doi.org/10.1016/0094-1190(92)90022-D
Myers, D., Park, J., & Cho, S. (2023). Housing shortages and the new downturn of residential mobility in the US. Housing Studies, 38(6), 1088–1109. https://doi.org/10.1080/02673037.2021.1929860
Ooi, J. T., & Le, T. T. (2012). New supply and price dynamics in the Singapore housing market. Urban Studies, 49(7), 1435–1451. https://doi.org/10.1177/0042098011415718
Park, E. S. (2013). Empirical analyses of price interactions between newly supplied and existing multi-family housing [Doctoral dissertation, Seoul National University]. https://snu-primo.hosted.exlibrisgroup.com/permalink/f/1l6eo7m/82SNU_SSPACE210371/124907
Popkin, S. J., Levy, D. K., O’Brien, M., & Boshart, A. (2021). An equitable strategy for public housing redevelopment. Urban Institute.
Potepan, M. J. (1989). Interest rates, income, and home improvement decisions. Journal of Urban Economics, 25(3), 282–294. https://doi.org/10.1016/0094-1190(89)90051-X
Rabe-Hesketh, S., & Skrondal, A. (2012). Multilevel and longitudinal modeling using Stata (Vol. II, 3rd ed.). Stata Press. https://www.stata-press.com/books/multilevel-longitudinal-modeling-stata/
Rothenberg, J. (1991). The maze of urban housing markets: Theory, evidence, and policy. University of Chicago Press. https://books.google.lt/books/about/The_Maze_of_Urban_Housing_Markets.html?id=BXWRLSFg51EC&redir_esc=y
Sagner, P., & Voigtländer, M. (2023). Supply side effects of the Berlin rent freeze. International Journal of Housing Policy, 23(4), 692–711. https://doi.org/10.1080/19491247.2022.2059844
Shi, S., Young, M., & Hargreaves, B. (2010). House price–volume dynamics: Evidence from 12 cities in New Zealand. Journal of Real Estate Research, 32(1), 75–100. https://doi.org/10.1080/10835547.2010.12091266
Statistics Korea. (2022). Housing census, 2022, housing units by type of housing units. https://kosis.kr/statHtml/statHtml.do?orgId=101&tblId=DT_1JU1501&conn_path=I2&language=en
Stein, J. C. (1995). Prices and trading volume in the housing market: A model with down-payment effects. The Quarterly Journal of Economics, 110(2), 379–406. https://doi.org/10.2307/2118444
Supreme Court of Korea. (2021). Housing transaction volumes by contract types. https://www.scourt.go.kr/supreme/supreme.jsp
Tsai, I. C. (2019). Dynamic price–volume causality in the American housing market: A signal of market conditions. The North American Journal of Economics and Finance, 48, 385–400. https://doi.org/10.1016/j.najef.2019.03.010
Tsai, I. C., & Peng, C. W. (2016). Linear and nonlinear dynamic relationships between housing prices and trading volumes. The North American Journal of Economics and Finance, 38, 172–184. https://doi.org/10.1016/j.najef.2016.10.014
Waltl, S. R., & Lepinteur, A. (2023). Tracking home-owners’ sentiments: Subjective indices and convergent validity. The Journal of Real Estate Finance and Economics, 1–29. https://doi.org/10.1007/s11146-023-09949-w
Wu, G., Li, C., Niu, X., Li, P., & Tao, L. (2021). Evolution of relationship between housing and rental prices and inter-urban differences in China under the context of the simultaneous rental and sales markets policy. Real Estate Management and Valuation, 29(3), 29–38. https://doi.org/10.2478/remav-2021-0019
Zhou, Z. G. (1997). Forecasting sales and price for existing single-family homes: A VAR model with error correction. Journal of Real Estate Research, 14(2), 155–167. https://doi.org/10.1080/10835547.1997.12090894
Bogdon, A. S. (1992). The determinants of homeowner expenditures for renovation, alteration and repair [Thesis, Harvard University]. ProQuest Dissertations & Theses Global. https://www.proquest.com/openview/c6ec5853a073734a4255f12066023579/1?pq-origsite=gscholar&cbl=18750&diss=y
Chau, K. W., Wong, S. K., & Yiu, E. C. Y. (2003). Price discovery function of forward contracts in the real estate market: An empirical test. Journal of Financial Management of Property and Construction, 8(3), 129–137.
Chung, E. (2002). Redevelopment and house prices: Expectations and realizations. Korea Real Estate Review, 12(2), 143–155.
Clapp, J. M., & Salavei, K. (2010). Hedonic pricing with redevelopment options: A new approach to estimating depreciation effects. Journal of Urban Economics, 67(3), 362–377. https://doi.org/10.1016/j.jue.2009.11.003
Clark, S., & Lomax, N. (2020). Rent/price ratio for English housing sub‐markets using matched sales and rental data. Area, 52(1), 136–147. https://doi.org/10.1111/area.12555
Clauretie, T., & Wolverton, M. (2006). Leave vacant or rent: The optimal decision for absentee home sellers. Journal of Real Estate Research, 28(1), 25–38. https://doi.org/10.1080/10835547.2006.12091172
Clayton, J., Miller, N., & Peng, L. (2010). Price-volume correlation in the housing market: Causality and co-movements. The Journal of Real Estate Finance and Economics, 40, 14–40. https://doi.org/10.1007/s11146-008-9128-0
Colwell, P. F. (2002). Tweaking the DiPasquale-wheaton model. Journal of Housing Economics, 11(1), 24–39. https://doi.org/10.1006/jhec.2001.0301
de Wit, E. R., Englund, P., & Francke, M. K. (2013). Price and transaction volume in the Dutch housing market. Regional Science and Urban Economics, 43(2), 220–241. https://doi.org/10.1016/j.regsciurbeco.2012.07.002
Depken, C. A., Hollans, H., & Swidler, S. (2009). An empirical analysis of residential property flipping. The Journal of Real Estate Finance and Economics, 39, 248–263. https://doi.org/10.1007/s11146-009-9181-3
DiPasquale, D. (1999). Why don’t we know more about housing supply? The Journal of Real Estate Finance and Economics, 18(1), 9–23. https://doi.org/10.1023/A:1007729227419
DiPasquale, D., & Wheaton, W. C. (1992). The markets for real estate assets and space: A conceptual framework. Real Estate Economics, 20(2), 181–198. https://doi.org/10.1111/1540-6229.00579
Ferreira, F., Gyourko, J., & Tracy, J. (2010). Housing busts and household mobility. Journal of Urban Economics, 68(1), 34–45. https://doi.org/10.1016/j.jue.2009.10.007
Follain, J. R., & Velz, O. T. (1995). Incorporating the number of existing home sales into a structural model of the market for owner-occupied housing. Journal of Housing Economics, 4(2), 93–117. https://doi.org/10.1006/jhec.1995.1005
Genesove, D., & Mayer, C. (2001). Loss aversion and seller behavior: Evidence from the housing market. The Quarterly Journal of Economics, 116(4), 1233–1260. https://doi.org/10.1162/003355301753265561
Genesove, D., & Mayer, C. J. (1994). Equity and time to sale in the real estate market (NBER Working Paper No. 4861). National Bureau of Economic Research. https://doi.org/10.3386/w4861
Hausman, J. A., & Taylor, W. E. (1981). Panel data and unobservable individual effects. Econometrica, 49(6), 1377–1398. https://doi.org/10.2307/1911406
Hausman, J., & McFadden, D. (1984). Specification tests for the multinomial logit model. Econometrica, 52(5), 1219–1240. https://doi.org/10.2307/1910997
Hort, K. (2000). Prices and turnover in the market for owner-occupied homes. Regional Science and Urban Economics, 30(1), 99–119. https://doi.org/10.1016/S0166-0462(99)00028-9
Huang, Y., Lieske, S. N., & Liu, Y. (2023). Factors influencing vertical urban development at the parcel scale: The case in Brisbane, Australia. Environment and Planning B: Urban Analytics and City Science, 50(3), 694–708. https://doi.org/10.1177/23998083221129283
LaCour-Little, M., & Yang, J. (2023). Seeking alpha in the housing market. The Journal of Real Estate Finance and Economics, 67(3), 319–374. https://doi.org/10.1007/s11146-021-09853-1
Lan, C. I. C., & Lee, C. J. (2020). Property-led renewal, state-induced rent gap, and the sociospatial unevenness of sustainable regeneration in Taipei. Housing Studies, 36(6), 843–866. https://doi.org/10.1080/02673037.2020.1720615
Lee, B. S., Chung, E. C., & Kim, Y. H. (2005). Dwelling age, redevelopment, and housing prices: The case of apartment complexes in Seoul. The Journal of Real Estate Finance and Economics, 30, 55–80. https://doi.org/10.1007/s11146-004-4831-y
Leung, C., Lau, G., & Leong, Y. (2002). Testing alternative theories of the property price-trading volume correlation. Journal of Real Estate Research, 23(3), 253–264. https://doi.org/10.1080/10835547.2002.12091081
Li, X., Han, S. S., & Wu, H. (2019). Urban consolidation, power relations, and dilapidated residential redevelopment in Mutoulong, Shenzhen, China. Urban Studies, 56(13), 2802–2819. https://doi.org/10.1177/0042098018799950
Loewenstein, L., & Willen, P. S. (2023). House prices and rents in the 21st century (No. w31013). National Bureau of Economic Research. https://doi.org/10.3386/w31013
Marlett, D. M. (1993). Causes of anxiety for transfer students: Implications for teachers. https://eric.ed.gov/?id=ED359162
Miceli, T. J., & Sirmans, C. F. (1999). Tenant turnover, rental contracts, and self-selection. Journal of Housing Economics, 8(4), 301–311. https://doi.org/10.1006/jhec.1999.0253
Miller, N., & Sklarz, M. (1986). A note on leaning indicators of housing market price trends. Journal of Real Estate Research, 1(1), 99–109. https://doi.org/10.1080/10835547.1986.12090516
Montgomery, C. (1992). Explaining home improvement in the context of household investment in residential housing. Journal of Urban Economics, 32(3), 326–350. https://doi.org/10.1016/0094-1190(92)90022-D
Myers, D., Park, J., & Cho, S. (2023). Housing shortages and the new downturn of residential mobility in the US. Housing Studies, 38(6), 1088–1109. https://doi.org/10.1080/02673037.2021.1929860
Ooi, J. T., & Le, T. T. (2012). New supply and price dynamics in the Singapore housing market. Urban Studies, 49(7), 1435–1451. https://doi.org/10.1177/0042098011415718
Park, E. S. (2013). Empirical analyses of price interactions between newly supplied and existing multi-family housing [Doctoral dissertation, Seoul National University]. https://snu-primo.hosted.exlibrisgroup.com/permalink/f/1l6eo7m/82SNU_SSPACE210371/124907
Popkin, S. J., Levy, D. K., O’Brien, M., & Boshart, A. (2021). An equitable strategy for public housing redevelopment. Urban Institute.
Potepan, M. J. (1989). Interest rates, income, and home improvement decisions. Journal of Urban Economics, 25(3), 282–294. https://doi.org/10.1016/0094-1190(89)90051-X
Rabe-Hesketh, S., & Skrondal, A. (2012). Multilevel and longitudinal modeling using Stata (Vol. II, 3rd ed.). Stata Press. https://www.stata-press.com/books/multilevel-longitudinal-modeling-stata/
Rothenberg, J. (1991). The maze of urban housing markets: Theory, evidence, and policy. University of Chicago Press. https://books.google.lt/books/about/The_Maze_of_Urban_Housing_Markets.html?id=BXWRLSFg51EC&redir_esc=y
Sagner, P., & Voigtländer, M. (2023). Supply side effects of the Berlin rent freeze. International Journal of Housing Policy, 23(4), 692–711. https://doi.org/10.1080/19491247.2022.2059844
Shi, S., Young, M., & Hargreaves, B. (2010). House price–volume dynamics: Evidence from 12 cities in New Zealand. Journal of Real Estate Research, 32(1), 75–100. https://doi.org/10.1080/10835547.2010.12091266
Statistics Korea. (2022). Housing census, 2022, housing units by type of housing units. https://kosis.kr/statHtml/statHtml.do?orgId=101&tblId=DT_1JU1501&conn_path=I2&language=en
Stein, J. C. (1995). Prices and trading volume in the housing market: A model with down-payment effects. The Quarterly Journal of Economics, 110(2), 379–406. https://doi.org/10.2307/2118444
Supreme Court of Korea. (2021). Housing transaction volumes by contract types. https://www.scourt.go.kr/supreme/supreme.jsp
Tsai, I. C. (2019). Dynamic price–volume causality in the American housing market: A signal of market conditions. The North American Journal of Economics and Finance, 48, 385–400. https://doi.org/10.1016/j.najef.2019.03.010
Tsai, I. C., & Peng, C. W. (2016). Linear and nonlinear dynamic relationships between housing prices and trading volumes. The North American Journal of Economics and Finance, 38, 172–184. https://doi.org/10.1016/j.najef.2016.10.014
Waltl, S. R., & Lepinteur, A. (2023). Tracking home-owners’ sentiments: Subjective indices and convergent validity. The Journal of Real Estate Finance and Economics, 1–29. https://doi.org/10.1007/s11146-023-09949-w
Wu, G., Li, C., Niu, X., Li, P., & Tao, L. (2021). Evolution of relationship between housing and rental prices and inter-urban differences in China under the context of the simultaneous rental and sales markets policy. Real Estate Management and Valuation, 29(3), 29–38. https://doi.org/10.2478/remav-2021-0019
Zhou, Z. G. (1997). Forecasting sales and price for existing single-family homes: A VAR model with error correction. Journal of Real Estate Research, 14(2), 155–167. https://doi.org/10.1080/10835547.1997.12090894