[Square] 3 Customized Secrets to Survive Even When Real Estate Collapses

Gojongwan, Director of the Korea Asset Management Research Institute

It is truly the presidential election season. Expectations for real estate stability have focused attention on the new policies of the next government. With the confirmation of the ruling and opposition presidential candidates, a fierce real estate battle has also begun. Lee Jae-myung, the Democratic Party candidate, has declared expansion of supply and strengthening of taxes and regulations, including the introduction of a national land holding tax following the basic housing policy. On the other hand, Yoon Seok-yeol, the People Power Party candidate, has pledged to increase supply and ease regulations through cost-based housing, a full review of capital gains tax and comprehensive real estate tax, and revitalization of reconstruction and redevelopment. Both promise to increase the supply of the insufficient housing stock. However, there is a significant gap regarding whether the housing will be rental or sale, whether it will be publicly or privately led, as well as the content, methods, and regulations of supply. Whose policy will help stabilize the market and improve housing welfare for ordinary citizens? The choice is entirely up to the people.

Fortunately, the recent rapid rise in housing prices has slowed down. This is analyzed to be due to the cautious stance of buyers in their 20s and 30s, who had been stretching their finances to the limit ('Yeongkkeul'), caused by interest rate hikes, strengthened household loan regulations, and fears of a bubble collapse. There is ongoing debate over whether this is a temporary adjustment or a trend decline.

Two conditions are necessary for prediction. One is that a decline in transactions and prices must persist for more than two quarters to diagnose a shift from a rising to a falling phase. The other is that to measure changes in the entire market, the number of declining areas must increase by more than 50%, and the apartment prices in the Gangnam area, the top market and the epicenter of housing prices, must fall. Therefore, just a slowdown over about two months, especially when Gangnam housing prices are hitting new highs, shows that uncertainty remains high. In short, it is premature to interpret this as a transition to a stable phase or a sign of a full-scale decline. In the past, patterns of brief declines followed by rebounds have been observed several times. It is necessary to carefully observe market changes until the end of March next year, and remember the market principle that rental prices must stabilize for sale prices to stabilize.

The author views the possibility of a peak phase and inflection point in the housing market next year as high. If the new government's short- and long-term supply policies are firm, the market is highly likely to shift to a stable phase. Then, is there a secret to surviving even if the real estate market falls or crashes? Three tailored response strategies are recommended.

First, the homeless should actively target the 3rd phase new town pre-subscriptions that will pour out in the future and the redevelopment and reconstruction sale volumes starting next year. This is the most economical and best strategy. Recently, the increase in sale volumes and the decline in subscription competition rates are positive signals for increasing the chances of winning.

Second, one-home owners are advised to switch to super real estate in growth areas. The core is growth areas driven by four major growth indicators: population increase, income increase, infrastructure expansion, and administrative plans. In particular, choose apartment complexes with large land shares and continuously rising land prices. The wisdom of choosing the area first and then the property is an efficient method.

Third, multi-home owners should reduce their holdings. Considering the rapid rise in housing prices, overheating of the asset market, the cycle aspect, and bubble accumulation, a slimming or downsizing strategy is required. This means holding only necessary houses and reducing investment-purpose houses.

This is a time when one could be hit directly depending on the new government's real estate policy. In a rising or booming real estate market, multi-home owners are winners, but in the opposite case, they are likely to become losers. History repeats itself. The housing price crashes caused by the 1997 International Monetary Fund (IMF) foreign exchange crisis and the 2008 subprime mortgage crisis serve as a fresh lesson and a cautionary example.

Ko Jong-wan, Director of Korea Asset Management Research Institute (Special Professor, Graduate School of Real Estate Convergence, Hanyang University)

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