Administrative district reforms, Land Transaction Permission System, and land market dynamics: Evidence from South Korea

Abstract This study examines how administrative jurisdictional reform affects land market dynamics by analyzing the 2023 incorporation of Gunwi County into Daegu Metropolitan City, South Korea. We develop a supply‐and‐demand framework in which administrative reclassification raises expectations of future development and increases landowners’ reservation prices, while the contemporaneous Land Transaction Permission System restricts speculative demand after the actual implementation. Exploiting the sequential timing of the reform, we distinguish the announcement period from the implementation period and estimate difference‐in‐differences models using transaction‐level land market data from 2018 to 2024. The results show that both land prices and transaction activity increased after the announcement, whereas prices continued to rise but transaction volumes declined after the implementation. This pattern is consistent with an initial demand expansion followed by a supply‐side contraction driven by higher expected future land values, a supply‐side response that can be identified independently of the demand‐restricting effects of the LTPS. The price effects are substantially larger in urban‐designated zones, lower‐priced urban parcels, and parcels closer to local central business districts, where future development is more plausible. Robustness checks using alternative control groups, detailed parcel characteristics, regional controls, and compositional analyses support this interpretation. The findings show that administrative restructuring can reshape land markets by altering forward‐looking expectations, with implications for zoning, land‐use planning, and speculative market management.