Determinants of Liquidity in Secondary Real Estate Market

This study presents an analysis of panel data on market, demand, supply, and financial indicators to investigate the determinants of liquidity in the trading and auction markets. The empirical results confirm that the liquidities of the two secondary markets are positively correlated with auction prices, as proxy market indicators, and with the floor area of occupancy permits, as proxy supply indicators. However, the effects of the housing stock on the two real estate markets are negatively and significantly correlated and significant outcomes are absent in relation to housing demand. Moreover, although housing finance affects the liquidity of the trading market, because the cash settlement system in the auction market produces a low level of loan demand, it does not affect the liquidity of the auction market. Therefore, the authority can effectively influence the liquidity of the real estate market through loose and tight credit policies, and further control the real estate business cycle. In particular, the hedging demand for the expected inflation risk increases the liquidity of the real estate trading market when the economic environment is restricted.