"Next Year's Jeonse Crisis to Worsen... Prices Expected to Rise 5% Due to Listing Shortage"

Geonsanyeon Expects Higher Growth Rate Than 4.4% This Year
Sale Prices Fall 0.5% Due to Government Regulations...Capital Area Down 0.7%
Construction Orders Down 6.1%, Investment Expected to Rise 0.2%

[Asia Economy Reporter Yuri Kim] It is forecasted that nationwide jeonse prices will rise by 5.0% next year. This is higher than the expected increase rate of 4.4% this year, indicating continued instability in supply and demand due to a shortage of listings. Nationwide sale prices are expected to decline by 0.5% due to difficulties in selling caused by the government's multifaceted regulations. The metropolitan area is also projected to see a 0.7% decrease as the number of 'immediately available' properties is low, leading to a slowdown in buying demand.

The Korea Construction Industry Research Institute announced this on the 2nd at the '2021 Construction and Real Estate Market Outlook Online Seminar' held at the Construction Hall in Gangnam-gu, Seoul.

Regarding the jeonse prices in the real estate market, which have recently become an economic and social issue, demand remains steady but it is becoming difficult to find listings due to tenant protection measures, leading to an expected increase of about 5.0%, higher than this year. Kim Seong-hwan, a senior researcher at the institute, pointed out that it has become particularly difficult to enter the rental market and stated, "Measures such as easing eligibility for public rental housing are needed in the rental market, similar to the sales market."

Sale prices are expected to fall by 0.7% in the metropolitan area, 0.3% in provincial areas, and 0.5% nationwide. Researcher Kim said, "Demand is concentrated on houses that are immediately available, so initially high-priced properties will attract attention," but added, "Since the government continues to strongly pressure sellers, listings will appear first in areas where it is difficult to hold out, resulting in an overall price decline."

However, preference for the so-called 'smart one house' remains strong, so it is expected that sale listings will start to appear from the outskirts.

In particular, 2021 is expected to see a worsening imbalance in supply and demand between the jeonse and sale markets, causing market inefficiencies. Researcher Kim emphasized, "Since the rental market is a real demand market, the government needs to implement precise measures to quickly resolve inefficiencies." He also urged construction companies to "focus on projects encouraged by the government, such as public redevelopment and public reconstruction, to find new opportunities in this era of regulation."

Domestic construction orders in 2021 are forecasted to reach 164.1 trillion won, a 6.1% decrease from the previous year due to a contraction in private building orders. Construction investment is expected to slightly recover by 0.2% as public investment increases despite private sector sluggishness. Researcher Park Cheol-han explained, "Recently, construction orders, a leading indicator, have increased, but actual construction investment, a coincident indicator, has contracted, widening the gap between indicators. This is because uncertainty and volatility have increased due to government regulations amid a difficult economy."

Researcher Park emphasized, "To revitalize the economy and reduce market uncertainty, public stimulus measures should be concentrated in the first half of next year, and real estate regulations need to be adjusted." He added, "The recent increase in housing orders is due to growth not only in the metropolitan area but also in provincial regions. Due to government regulations, market volatility may increase in provincial areas following the metropolitan area. Therefore, it is necessary to adjust real estate regulations that expand uncertainty and volatility in the market."

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