The Effect of Land Transaction Volume with Chinese Investors on Jejudo's Housing Sales Price

Abstract

Foreign real estate investment in Jejudo, especially Chinese land transaction volume has grown considerably during the last few years since Jeju Special Self-Governing Province issued the Real Estate Investment Immigration System promotion program in 2010. The main purpose of this study is to explore the relationship between Jejus housing sales price and land turnover with foreign investors, aiming at Chinese real estate investors. This trend is estimated to exert an important macroeconomic effect on maintaining a higher housing price and even a long lasting housing bubble. The modeling of Jejus housing sales price is proposed from the point of view of a positive economic reaction for the real estate industry and from the point of view of an enormous demand for the travel industry. Using time series data from October 2012 to February 2016, the hypothesis arising from land trading volume with Chinese investors modeling reveals the consistency of this approach. There are also other relevant determining factors that exist from the housing price side and from the whole real estate dimension. Indeed, the real Gross Regional Domestic Product growth rate, Jejus population growth rate, and Korean benchmark interest rate are all related determinants, which explain the sustained increase in Jejudos housing purchase price. It is acknowledged that the control variables are multivariate and the Multiple Linear Regression Analysis is applied into this research paper. On the other hand, taking time series into consideration, Stata statistical method is also implemented into this study. Last but not least, in order to find out whether the relationship between the economic variables is spurious or nonsensical, the Unit Root Test Using ADF Test and Cointegration Test are interpreted adequately and put into use. In the final conclusion, the research results show that there is the presence of a contemporaneous long-term relationship between Jejus housing sales price and Chinese land transaction volume.