Demand for Rental Housing in Korea with Some Estimation Issues

Abstract

The purpose of this study is to estimate the determinants of rental-housing demand for three types of cities in Korea. The study focuses on the statistical estimation issues encountered in calibrating rental-housing demand: selectivity bias, estimation of hedonic prices, application of the permanent income hypothesis, and functional forms of rental housing demand. The procedure for the estimation of the demand function consists of a logit and ordinary least square to address the first three issues. These estimated values are then used as explanatory variables for the final housing-demand function in a two-step procedure. It is shown that these procedures are both practical and suitable for an analysis of the Korean rental housing market.