"Real Estate Influenced More by Government Policies than COVID-19... Only Short-Term Contraction During MERS"

[Asia Economy Reporter Yuri Kim] As COVID-19, which originated in Wuhan, China, spreads worldwide, concerns about the contraction of the financial and real estate markets are growing. However, analyses suggest that the impact on the real estate market will be limited.

According to Real Estate 114's analysis of real estate sale prices and pre-sale markets during the Middle East Respiratory Syndrome (MERS) outbreak in 2015, there was little to no significant impact, or only a short-term contraction. MERS was an infectious disease that resulted in 186 confirmed cases domestically from May to December 2015.

From May to mid-June 2015, the number of confirmed cases rapidly increased to over 100, reaching a peak of concern, but even during that period, apartment sale prices only slightly slowed their upward trend, and pre-sale volumes temporarily decreased (compared to May-June 2014, there were actually 20,000 more units).

At that time, the real estate market was undergoing government-led deregulation policies covering finance, subscription, supply, and reconstruction. It was also a period when the market was entering a major upward trend due to deregulation. Real Estate 114 stated, "Ultimately, government policies and market conditions such as low interest rates had a greater influence on the real estate market than the disease itself."

As of this morning, COVID-19 has resulted in 28 confirmed cases since last month, with a lower fatality rate and fewer confirmed cases compared to MERS. The recent slowdown in the increase of confirmed cases suggests it will be difficult to surpass the MERS level.

Apartment sale prices have slowed their rise since the announcement of the December 16th measures last year, with asking prices falling mainly in high-priced housing and reconstruction areas in Seoul. The Gangnam 3 districts (Gangnam, Seocho, Songpa) have shifted to a decline. Real Estate 114 analyzed, "The market has responded more sensitively to government policies than to the novel coronavirus."

In the pre-sale market, schedules are being expedited mainly in redevelopment projects at the stage after management disposition approval to avoid the pre-sale price ceiling system. From the perspective of construction companies and associations, it is necessary to advance supply as much as possible between February and April. The transfer of the subscription system from the Korea Financial Settlement Service to the Korea Real Estate Board has also caused January pre-sale volumes to be postponed to after February, affecting the increase or decrease in pre-sale volumes.

Yoon Ji-hae, Senior Researcher at Real Estate 114, stated, "Temporarily, the impact of COVID-19 may affect housing supply, but it is difficult to damage the overall price trend or the home-buying sentiment of demand groups. However, the commercial district (shopping area) market may be relatively more affected than the housing market if the current situation lasts longer than expected, due to reduced sales from fewer tourists and decreased profitability."

This content was produced with the assistance of AI translation services.