"House Prices Will Rise Again Next Year"... Uncontrollable Real Estate Sentiment

Bank of Korea 'December 2020 Consumer Sentiment Survey'
Belief in Real Estate Invincibility Continues to Grow

[Asia Economy Reporter Kim Eun-byeol] The public's sentiment that house prices will continue to rise next year is becoming more firmly established. Despite the government's relentless efforts throughout this year to curb house prices by introducing strong real estate measures, the public's expectation of rising house prices remains undiminished.

According to the 'December 2020 Consumer Sentiment Survey' released by the Bank of Korea on the 29th, the Housing Price Outlook Consumer Sentiment Index (CSI) rose 2 points from the previous month to 132. This is the highest level since the Bank of Korea began compiling related statistics in January 2013. It broke the record for the highest level for two consecutive months following last month. When this index exceeds 100, it means that more people expect house prices to rise in one year than those who expect them to fall.

In the early stages of the COVID-19 outbreak in April and May this year, the Housing Price Outlook CSI fell below 100. This was because many people expected a decline in transactions and an economic downturn due to the COVID-19 situation. However, as massive liquidity was injected in response to COVID-19 and with each announcement of government real estate measures such as those on June 17 and July 10, the sentiment for rising house prices grew stronger. The Housing Price Outlook CSI jumped 16 points to 112 in June and surged 13 points to 125 in July. Although it temporarily stalled in August and September, it rose by 8 points in November, surpassing 130.

Sentiment in the real estate market is a very important factor. If people believe in the 'real estate invincibility' theory, transaction volumes inevitably increase, which can lead to rising sale prices. Despite recording the highest rate of price increase in 14 years, expectations that prices will rise further and anxiety that one might fall behind if they do not buy now also played a role. The newly coined term 'Byeorakgeoji' (suddenly becoming poor by not buying a house) is a representative example reflecting such sentiment. A senior official from the Bank of Korea said, "In asset markets, participants' sentiment is the most important factor, and the biggest problem is that sentiment is not being controlled," adding, "It seems important for the government to build trust along with appropriate supply to calm the sentiment."

While expectations for rising house prices are growing, perceptions of the economy and household financial conditions are worsening. The Consumer Confidence Index (CCSI) surveyed by the Bank of Korea in December fell by 8.1 points from the previous month to 89.8, marking a decline for the first time in three months. This is due to the adverse effects of the social distancing measures raised in response to the third wave of COVID-19 in Korea.

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