Study on Spillover Effects in the Korean Housing Market Using the Frequency Connectedness Approach

This study applies the frequency-domain connectedness method, proposed by Baruník & Křehlík, to analyze spillover effects in regional real estate markets. Using apartment sale price indices from 17 metropolitan areas in South Korea between December 2012 and August 2024, the study examines the interconnectedness of housing markets in the short- (1–3 months), medium- (4–12 months), and long-term (over 12 months) horizons. The findings reveal that total connectedness increases over time, with Seoul emerging as a critical information hub, exerting significant spillover effects on the capital region and major metropolitan cities in the long run. While short- and medium-term price dynamics are largely driven by regional idiosyncrasies, long-term movements reflect broader interactions shaped by macroeconomic factors and policy shocks. Notably, the 2017 8·2 policy and 2020 6·17 policy illustrate the balloon effect and paradox of regulation, where effective regulations initially resulted in unintended market distortions in the mid-to-long-term. This research underscores the need for policy frameworks that consider spillover effects and highlights the importance of long-term stabilization strategies for balanced housing market development.