Outlook Unchanged This Year... Experts Say "House Prices Will Rise"

In-Depth Survey of Real Estate Experts
9 out of 10 Predict 'Further Increase'
COVID-19 and Jeonse Crisis Are Key Issues

[Asia Economy Reporters Yuri Kim, Donghyun Choi, Onyu Lim] "The decline the government expects is out of the question." This is the unanimous view of real estate experts regarding house prices this year. Asia Economy conducted an in-depth survey on the 4th of January with 10 real estate experts to mark the start of the new year of the Year of the Black Rabbit, and 9 of them predicted that house prices will rise this year. Although there were slight differences in degree, such as 'strong rise,' 'rise,' and 'strong stability,' the dominant view was that house prices will increase. Even the one expert who had a differing opinion forecasted a 'slight stability.' This reflects the market consensus that the house prices, which surged sharply last year, will not 'return to normal' as the government hopes.

Experts pointed to increased purchase demand due to the shortage of jeonse (long-term lease deposits), abundant liquidity, and a decrease in new housing supply as the background for further house price increases. In particular, since the costs associated with transactions such as acquisition tax and capital gains tax have risen sharply, they expected the market's withholding of listings to continue. However, the extent of the rise is expected to be less than last year. According to KB Real Estate Live On, the nationwide housing sales prices rose by 8.35% last year, marking the highest increase in 14 years since 2006 (11.60%).

The strength of mid- to low-priced housing in Seoul and the metropolitan area is expected to continue. Some also raised the possibility that ultra-high-priced housing prices in areas like Gangnam in Seoul could fluctuate again. In provinces, there is a forecast that price pressure will be greater in non-regulated areas where prices have risen relatively less. Jin-Hyung Seo, President of the Korea Real Estate Society (Professor at Gyeongin Women's University), diagnosed, "Sejong has potential for price increases due to the relocation of the National Assembly, expansion of the administrative capital, and its status as a growth city," and added, "Gangnam 3 districts and Dongjak-gu may see house prices rise due to the trend of concentrating on a single smart property and the U-turn phenomenon caused by the expansion of regulated areas." He also mentioned that house prices in development-benefited areas such as those along the Metropolitan Area Express Railway (GTX) could show strength.

Opinions were divided on house price movements in the first and second halves of the year. Kyo-Un Shim, Professor of Real Estate at Konkuk University, said, "In the first half, additional listings from multi-homeowners may appear, and with the Seoul mayoral election, both sellers and buyers may take a breather." Yang Ji-Young, Director of Yang Ji-Young R&C Research Institute, also forecasted, "Due to loan regulations, buying demand will inevitably weaken, so the rise in house prices will be less than last year." On the other hand, there was a counterargument that the impact of multi-homeowners' listings on the market would be limited. Won-Gap Park, Senior Real Estate Specialist at KB Kookmin Bank, said, "Some tax-saving listings may appear in the first half, but since many multi-homeowners have already gifted or sold properties, it is not expected to flood the market."

The problem lies with jeonse prices. Experts gathered in their forecast of a 'strong rise.' In particular, they expressed concern that if the rise in jeonse prices accelerates, it could further push up sales prices. Director Yang said, "Jeonse price increases will be higher, especially centered around pre-subscription sites in the 3rd new towns such as Hanam and Namyangju, where prospective subscribers are flocking." Professor Shim said, "Due to the Lease 3 Act, jeonse prices will continue to show a strong upward trend this year," and predicted more pronounced price increases in Seoul and the metropolitan area than in provinces. Professor Dae-Jung Kwon of Myongji University Graduate School of Real Estate warned of a vicious cycle where rising jeonse prices push up house prices, saying, "If the gap between sales prices and jeonse prices narrows, gap investments are likely to increase."

Experts identified the following as key variables affecting the market: ▲COVID-19 ▲whether liquidity will be withdrawn ▲the direction of real estate policies. In particular, they saw the start of discussions on liquidity withdrawal being determined by the impact of vaccine distribution in relation to COVID-19. However, Eun-Hyung Lee, Senior Researcher at the Korea Institute of Construction Policy, said, "Since countries are focusing all efforts on economic stimulus, rapid liquidity reduction will be difficult," and added, "This will lead to a decline in currency value, causing real estate prices to rise." Deok-Rye Kim, Head of Housing Policy Research at the Korea Research Institute for Human Settlements, said, "Unexpected policy variables remain a factor to watch this year as well," and emphasized, "Above all, the balance between supply and demand will determine the direction of house prices."

Experts advised that without a 180-degree policy shift by the government, it is difficult to expect house price stabilization. Young-Jin Ham, Head of the Big Data Lab at Zigbang, emphasized, "To calm purchase demand and alleviate the balloon effect, the government must focus on stabilizing the rental market." Hak-Ryeol Kim, Director of Smart Tube Real Estate Research Institute (Passion), advised, "Unless regulations that suppress market transactions are reversed 180 degrees, there is no way to stop house price increases. It is important not only to increase physical supply but also to bring out properties that can be traded in the market." Myung-Sook Ahn, Head of the Real Estate Investment Support Center at Woori Bank, said, "Regulatory easing on redevelopment and reconstruction should be implemented so that the private sector can move together." Specialist Park also explained, "The market must continuously receive signals of supply expansion, and those signals must become credible."

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