Experts are also skeptical of whether the housing market recession experienced 10 years ago is repeating itself.
◇ The ’10-year cycle’ is reviving… Steep decline in house prices, record-breaking trade stagnation
According to a survey by the Korea Real Estate Agency on the 10th, apartment prices in Seoul fell 0.15% from the previous week. This is the largest drop in nine years and one month since the survey on August 5, 2013 (-0.15%). Last week, apartment prices in the metropolitan area also fell 0.21%, the biggest drop in 10 years since the survey on September 10, 2012 (-0.22%).
Ten years ago, 2012, was the period when the decline in house prices that had continued since 2010 reached its peak due to the 2008 global financial crisis (Lehman Brothers incident) and the spread of Bogeumjari housing (half-price apartment) supply.
According to the statistics of the Korea Real Estate Agency, apartment prices in Seoul fell 6.55% in 2012 and apartment prices in the metropolitan area by 5.77%, the largest decline since the 1998 financial crisis.
Accordingly, in the real estate market, analysis is coming out that the ’10-year cycle’ theory, in which house prices rise and fall like a cycle every 10 years, will be repeated in the aftermath of a severe transaction stagnation following this year’s steep interest rate hike.
This year’s apartment transaction volume is the lowest on record since 2012, 10 years ago, during the previous recession. This is because buying sentiment has sharply contracted due to the rush of interest rate hikes in global countries including Korea.
According to the Seoul Real Estate Information Plaza, the accumulated transaction volume of apartments in Seoul from January to July this year totaled 8,557. decreased by 162%.
This is a 257% decrease compared to the same period last year (35,550 cases).
The Seoul apartment supply and demand index recorded 80.9, indicating that buying sentiment has been weakening for the 18th week in a row. The simple index alone is the lowest in about three years and two months since July 1, 2019 (80.3).
A representative of a real estate agency in Daechi-dong, Gangnam-gu, said, “There is no one to buy a house other than the unavoidable demand to buy a house.
◇ Interest rates continue to rise… Weakness inevitable after Chuseok
Experts predicted that the recent downturn in trading and price decline will continue even after Chuseok.
As the US continues to raise interest rates in global countries, such as suggesting the possibility of a ‘giant step’ (0.75 percentage point increase at a time) for three consecutive months this month, the Bank of Korea is inevitably going to raise interest rates for the time being.
Although the government has recently been loosening the regulations of the past in the name of ‘normalization’, it is also the reason why house prices are predicted to fall. The government set the policy direction on the basis of ‘stability first and deregulation later’, fearing that it could re-stimulate house prices that were barely captured.
A representative example is that the upper limit of the mortgage loan ratio (LTV) applied to households purchasing a home for the first time in their life has been eased to 80% since last month. For first-time home buyers, the LTV increased from 40% in the case of speculative areas and over-speculation districts and 50% in areas subject to adjustment to 80%, but the total debt-to-income ratio (DSR) regulation remains the same. Rather, since July, borrowers with a total loan amount of more than 100 million won are also restricted from borrowing depending on their income, so there is virtually no easing effect.
Although the government is contemplating easing the regulation on loans exceeding 1.5 billion won, which is currently banned in regulated areas, the impact on the market is bound to be very limited unless the DSR is also eased.
There are many observations that there will be no significant easing of the ‘actually abolished level’ of the improvement plan for the recovery of excess profits from reconstruction to be unveiled this month.
J&K Urban Improvement CEO Baek Jun said, “The surplus profit system for reconstruction will be different for each complex as soon as the amount to be paid is confirmed. It may act as a stumbling block for business promotion.”
Experts believe that the decline in house prices will continue in the second half of the year as transaction stagnation continues.
Kim Gyu-gyu, head of the Korea Investment & Securities Asset Succession Research Institute, said, “We are expecting an additional rate hike this year, and there is a possibility of an interest rate hike until the first half of next year.”
In particular, there are many experts who expect the price to fall further as the number of sales increases during the transfer tax for multi-homeowners in early May next year and before the grace period ends.
Woo Byung-tak, head of the real estate team at Shinhan Bank’s WM Consulting Center, said, “It seems that apartment prices, including Seoul, have begun to decline. Director Kim Gyu-gyu said, “Currently, home buyers often respond that they need to drop 20-30% from the previous high.”
There are also voices of concern about a hard landing in the market due to the steep interest rate hike. In particular, there is a lot of concern about the ‘2030 Youngkul people’ who bought a house with unreasonable borrowing during the past year or two when house prices soared.
Park Won-gap, senior real estate expert at KB Kookmin Bank, said, “House prices are falling sharply in Gangbuk, Gyeonggi, and Incheon, where house prices soared last year. We need to do something about it,” he said.
Ham Young-jin, head of Big Data Lab, Jikbang, said, “It is necessary to prepare measures for marginal borrowers through deleveraging policies and low-interest loans, and to establish a clear policy direction for taxes such as property tax and transfer tax.”
◇ Growing fears of a reverse taxation… Jeonse market expected to continue to slump due to interest rate hike
Although the fall peak season begins, there are many predictions that the jeonse market will continue to be weak.
As the interest rate hike trend continues, the ‘August riots’ that the price of jeonse prices will rise sharply due to the decrease in the demand for immigration, which has exhausted the renewal rights due to the enforcement of the right to renew the contract two years ago, has become unfamiliar.
Rather, after the enforcement of the ‘Lease 2 Act’, such as the right to apply for contract renewal and the upper limit system for cheonsei, the number of renewals of contracts has increased, and as the loan interest rate is higher than the rent to cheonsei ratio, the monthly rent to cheonsei is progressing rapidly.
Seoul, as well as the metropolitan area, is also realizing the ‘reverse-jeonse crisis’ in which deposits cannot be returned even when the jeonse lease expires. In some provinces and metropolitan areas, the fear of ‘can charter’ is also growing.
A representative of a brokerage firm in Jamsil-dong, Songpa-gu, said, “Jeonse items are piling up, and a new rental house looking for a new tenant cannot be traded unless it is lowered by 100 million to 200 million won from the market price. It doesn’t seem like it,” he predicted.
Kyunghee Yeo, Senior Researcher at Real Estate R114, said, “After the enforcement of the Rental Lease Act 2, the price of jeonse has soared and the conversion to monthly rent is rapidly increasing. said
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