Real Estate Market Ignited by Fear Beyond Expectations of Rising House Prices [Asset Bubble Warning]

Despite 24 Measures, Balloon Effect Persists
Youth's 'Yeongkkeul' Spurs Movement to Outskirts
Fear Psychology and Abundant Liquidity Cited
Experts Say "Downward Stabilization Seems Difficult"

[Asia Economy Reporter Yuri Kim] The government's premature regulations are heating up the real estate market nationwide. Buying momentum is spreading like a domino effect not only in Seoul and other metropolitan areas but also in provincial large cities and even small and medium-sized cities, creating an unprecedented trend of rising housing prices.

Ironically, what stimulated housing prices was the 24 large and small real estate measures announced after the inauguration of the Moon Jae-in administration, which declared a "war on housing prices." The government's regulation-focused policies have been criticized for turning the entire country into a speculative market by causing a balloon effect where tightening one side inflates the other. Even in Seoul, where dense overlapping regulations targeting high-priced homes and multi-homeowners were implemented across taxes and loans, the result has been a failure to curb housing prices in Gangnam, instead causing a backlash that only raised mid-to-low priced housing prices in the outskirts.

Experts point to market backlash psychology and abundant liquidity as reasons why regulations are ineffective. With ultra-low interest rates, so-called "Yeongkkeul loans" (loans that pull together all possible funds, even one's soul) have spread like a trend, continuously injecting funds into the market. This is also evidenced by last year's total nationwide housing transaction amount. According to Zigbang, the total nationwide housing transaction amount last year (as of January 7) was 360.8 trillion KRW, the highest since statistics began in 2006. Of this, 282.2 trillion KRW, or 78%, was concentrated in the apartment market, but the row house/multi-family (35.4 trillion KRW) and detached/multi-household (43.2 trillion KRW) markets also saw transaction amounts surge by 36.68% and 24.86%, respectively, compared to the previous year. Funds from the market flooded into the housing market regardless of type.

In particular, what ignited the soaring housing prices was market fear psychology. Not only middle-aged and older adults with purchasing power but also young people who must rely mostly on loans for purchase funds have joined, pushing housing prices toward an uncontrollable situation. According to the Korea Real Estate Board, the proportion of home purchases by people in their 30s, which was in the 25% range at the beginning of 2019, soared to the 30% range last year. Experts diagnose that as young people joined the market, the housing price rise rapidly spread from central areas to outskirts and from apartments to non-apartments. Looking at last year's housing price increase rates, Nowon-gu, an outer area, rose by 19.4%, nearly double the Seoul average of 10.7%. The Seoul row house/multi-family sales price index change rate slightly slowed to 0.19% in September and 0.15% in October last year but increased again to 0.18% in November and 0.19% in December.

Ham Young-jin, head of Zigbang Big Data Lab, said, "Considering abundant liquidity, it is difficult to expect immediate downward stabilization of real estate market prices this year as well," adding, "Rather, the decrease in apartment supply and the resulting pressure on rising jeonse prices are more likely to put upward pressure on sales prices again."

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