The Division of Spatial Housing Submarkets: A Theory and the Case of Seoul

This study suggests a basis for the division of spatial housing submarkets in enhancing the understanding of housing markets. The theoretical background of the division is based upon the relationship between commuting patterns and the structure of house prices. An examination of the process of ‘expansion—overlap—merging’ between residential spheres, defined as a unit consisting of a centre of employment and the surrounding residential area, provides an overview of a probable form of merged residential spheres in large cities. In an empirical analysis of Seoul the spatial housing submarkets were identified on the basis of the hierarchies between the local authorities from commuting patterns. The relevance of the division was tested with three statistical procedures: hedonic price models, Chow tests, and weighted standard error tests. The statistical tests suggested that the housing market in Seoul can be divided into three distinct spatial submarkets, which supports the reasoning of the division method suggested in this study.