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<p>This paper examines how substantial rental deposits in housing markets can both reflect and influence future housing prices through their dual role as financial instruments and market signals. Using South Korea’s unique Jeonse system as a case study, we analyze how rental market arrangements combining significant upfront deposits (40–60% of property value) with traditional leasing create complex financial linkages between rental and housing markets. Our empirical analysis using comprehensive housing market data from 2011 to 2023, including the COVID-19 pandemic period, reveals that deposit-to-price ratios maintain consistency around 63%, reflecting both market participants’ expectations and the system’s role in housing finance. To address potential endogeneity concerns, we implement a rolling window forecasting approach that uses only information available at time <i>t</i> to construct expected future prices. Our fixed effects specifications confirm that the predictive relationship remains robust even after controlling for region, year, and pandemic effects. Our findings offer broader insights into how alternative financing structures in rental markets can create information flows and financial linkages that affect housing market dynamics. These results contribute to our understanding of the interaction between rental arrangements, housing finance, and price formation in real estate markets.</p>

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Embedded Expectations: Contractual Mechanisms as Predictive Indicators in Housing Markets

  • 期刊论文

  • 发表日期：

    2026年6月1日

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  • Byunggeor Moon

摘要

This paper examines how substantial rental deposits in housing markets can both reflect and influence future housing prices through their dual role as financial instruments and market signals. Using South Korea’s unique Jeonse system as a case study, we analyze how rental market arrangements combining significant upfront deposits (40–60% of property value) with traditional leasing create complex financial linkages between rental and housing markets. Our empirical analysis using comprehensive housing market data from 2011 to 2023, including the COVID-19 pandemic period, reveals that deposit-to-price ratios maintain consistency around 63%, reflecting both market participants’ expectations and the system’s role in housing finance. To address potential endogeneity concerns, we implement a rolling window forecasting approach that uses only information available at time t to construct expected future prices. Our fixed effects specifications confirm that the predictive relationship remains robust even after controlling for region, year, and pandemic effects. Our findings offer broader insights into how alternative financing structures in rental markets can create information flows and financial linkages that affect housing market dynamics. These results contribute to our understanding of the interaction between rental arrangements, housing finance, and price formation in real estate markets.