This paper studies price spillover effects in housing market, utilizing a policy change on apartment reconstruction. Under the circumstance of various years built of houses in Seoul, the policy on reconstruction applies to a part of houses in Seoul. However, the policy change may affect the whole housing market via spillover effects of the policy.

To investigate spillover effects, I suggest an extended version of difference- in-difference model that captures both the direct and spillover effects of the policy. Using thorough data on apartments in Seoul, combined with geographical information, I found a significant spillover effect that diminishes with the distance from apartments in the process of reconstruction. Meanwhile, the direct effect is found insignificant. The spillover effect seems to make it hard to capture the direct effect of the policy since the prices of houses near the reconstruction apartments follow the prices of the reconstruction apartments. In sum, the spillover effect of the policy was a crucial factor in the housing market of Seoul in 2018.

This study finds a type of externalities which is prevalent in housing market. This spillover effect must be taken into account when policies are applied not only to the whole market, but to a part of the houses.

Preface
Executive Summary

Chapter 1 Introduction

Chapter 2 Apartments and Reconstruction Projects
　Section 1 Housing Supply and Apartments
　Section 2 Reconstruction Projects
　Section 3 Revision of Reconstruction Safety Inspection Standards

Chapter 3 Apartment Data and Price Changes
　Section 1 Apartment Complex and Price Data
　Section 2 Apartment Price Index
　Section 3 Price Changes by Years Built

Chapter 4 Effects of Reconstruction Policy Changes
　Section 1 Empirical Model
　Section 2 Direct Effects of the Policy
　Section 3 Price Spillover Effects of the Policy
　Section 4 Dynamic Policy Effects

Chapter 5 Conclusion

References
Appendix
ABSTRACT