Record High Rally Amid Sharp Drop in Trading Volume... Abnormal Housing Price Trends Continue

Interest Rate Hike Forecast, Demand Can't Keep Up with Peak Theory, Housing Prices Soar
Increase in Property Tax Leads to More Monthly Rent Conversions... Expensive Jeonse Prices Fuel Vicious Cycle
Experts "Prices Will Rise Until Next Spring"

[Asia Economy Reporter Kangwook Cho] Nearly five months have passed since the government announced the February 4th housing supply plan, yet the outlook for housing prices remains far from "stable." Despite repeated government warnings about a real estate market "bubble," including Deputy Prime Minister for Economy Hong Nam-ki's "peak theory" and Bank of Korea Governor Lee Ju-yeol's "interest rate hike forecast," an abnormal phenomenon persists where listings decrease amid a slowdown in transactions, and prices surge rapidly. Experts predict that the second half of the year will be a "chaotic era" with an even wider gap between sellers' asking prices and buyers' bids. Sellers want to list properties at high prices, while buyers aim to purchase cheaply, leading to ongoing power struggles between the two forces. Some even argue that the sharp decline in transaction volume despite rising housing prices will cause distortions in statistical data.

◇ Increasing 'holding out' and fewer listings... the market has come to a halt = Experts identified the "listing cliff" as the most concerning issue for the second half of this year. Amid the sluggish progress of the government's supply plan, the emphasis on public sector involvement and the resulting "crowding-out effect" on the private sector have reduced overall supply. Furthermore, the intensified property tax and capital gains tax surcharges on multiple homeowners, implemented on the 1st of this month, along with the mandatory rental reporting system, have deepened the transaction freeze and triggered a surge in gift transfers as an unintended consequence. The government's policy goal of pressuring multiple homeowners with strict regulations to release listings before enforcement, thereby adjusting housing prices and stabilizing the real estate market, has once again missed the mark. In particular, concerns have been raised that this market "freeze" phenomenon may distort statistics, making it appear as if housing prices are "stable."

Kim Hak-ryeol, Director of SmartTube, pointed out, "There is a lot of latent demand, but there are no listings for either sales or jeonse (long-term lease)." He added, "Policies that could resolve this need to be introduced, but the current government keeps implementing policies that only reduce listings." He explained that policies such as the capital gains tax surcharge on multiple homeowners, rental legislation, and stricter residency requirements are eliminating any chance for market turnover.

Ko Jun-seok, Adjunct Professor at Dongguk University Law School, said, "The most fundamental cause is the supply shortage, and next is the lack of inventory combined with increasing property tax burdens." He criticized, "The pass-through of property taxes is turning jeonse into monthly rent, causing jeonse prices to keep rising, which in turn stimulates the sales market, creating a vicious cycle."

◇ The presidential election turning into a 'real estate war,' raising concerns about price stimulation = Analysts also suggest that the approaching presidential election, amid the government's delayed supply plan with only one year left in its term and sluggish progress hampered by real estate speculation, is driving housing prices upward.

Lee Chang-moo, Professor of Urban Engineering at Hanyang University, said, "The government's real estate policies essentially demand things that the market does not accept." He added, "The February 4th plan has no realizable parts, and the easing of real estate taxes remains politically divisive, making it insufficient to provide clear initiatives to the market."

Doosung Kyu, Senior Research Fellow at the Korea Research Institute for Construction Industry, said, "Although the government announced plans to expand supply through the February 4th plan, four months have passed without concrete results, spreading doubts about whether the supply expansion plan can be realized." He pointed out, "Presidential candidates are likely to propose deregulation measures without much regard for feasibility, making it difficult to trust the current government or ruling party's real estate policies."

Jang Jae-hyun, Head of Research at RealToday, said, "Presidential contenders have already started discussing big-picture plans including redevelopment and reconstruction for regional development, engaging in various pledge competitions." He criticized, "Most areas in Seoul are redevelopment and reconstruction zones with aging housing, so housing prices are inevitably stimulated and rise due to this competitive 'hope torture.'"

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◇ "Non-homeowners should hurry to secure their own homes" = Experts agreed that the current rise in housing prices shows signs of overheating. However, they also shared the view that the upward trend is likely to continue for the time being.

Ko Jong-wan, Director of the Korea Asset Management Research Institute, said, "I believe there is a 20-30% bubble in current housing prices in Seoul and the metropolitan area. We are either near the peak or have already passed it." He predicted, "However, since the government and policies continue to inflate the bubble, housing prices are expected to rise further until spring next year, just before the bubble bursts."

Ham Young-jin, Head of the Big Data Lab at Zigbang, said, "The steady rise in jeonse prices, combined with lower supply compared to last year, will continue to push up sales prices." He advised, "As 3rd phase new town supply and units subject to the price ceiling system in the second half of the year come out, non-homeowner household heads should actively participate in subscription if they have high priority points."

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