[Next Year's Real Estate Outlook] "Supply Shortage Causes House Price Increase"..."Lease Law Holds Back, Jeonse and Monthly Rent Up Over 5%"

70% "Next Year's Increase Rate 2~5%"

Relocation Demand Concentrates in Gyeonggi-do

"Smart One House" in Seoul Gangnam Area

Full-scale House Price Decline Period "After 2023"

[Asia Economy Reporters Kim Min-young, Kim Dong-pyo, Moon Je-won] According to a survey conducted by Asia Economy targeting 20 real estate experts, the reason why house prices are expected to continue rising next year is due to a 'supply drought.' Although the 3rd New Town subscription is underway, the supply is far from sufficient to satisfy the real demand of homebuyers, as the number of households without homes in Seoul exceeds 9 million. Experts particularly noted in the in-depth survey that while housing transactions will continue to shrink for a while due to variables such as loan regulations, the presidential election, and interest rate hikes, the preference for a 'smart one house' will strengthen, leading to a noticeable rise in house prices centered around the Gangnam 3 districts.

◆Next Year's House Price Increase Rate: 2~5%= Regarding next year's house price increase rate, 70% predicted 2~5%. Considering that the average apartment sale price in Seoul in November was 1,237.29 million KRW, this means an increase of up to 60 million KRW next year. If the forecast holds, the average apartment sale price in Seoul will approach 1.4 billion KRW next year.

The main factor driving house prices up was identified as supply shortage. The supply drought is worsening as scheduled sales plans are delayed or canceled amid a continued supply-demand imbalance caused by supply shortages. Although the government announced it would supply a total of 176,000 households through the 3rd New Town subscription, this is far from enough considering that the number of households without homes in Seoul reaches 9 million. Kim Hak-ryeol, head of SmartTube Real Estate Research Institute, said, "Basically, there will be no new move-in volume next year, and the failure to ease capital gains tax for multi-homeowners means existing listings are not coming onto the market," adding, "There is a high possibility of house price increases due to supply shortages."

Experts pointed out Gyeonggi-do and Seoul Gangnam area as places where house price increases will be particularly noticeable next year. They expect demand in Gyeonggi-do adjacent to Seoul to increase as the price of Seoul apartments has surged and loan regulations have raised the entry barrier. Kim said, "Relocation demand from people who could not find a house in Seoul will concentrate in Gyeonggi and Incheon, which are adjacent to Seoul."

In Gangnam, the preference for a smart one house is growing stronger due to the burden of property tax, and demand for apartments in the Gangnam area is expected to remain strong. According to KB Real Estate, the KB Leading Apartment 50 Index, which represents the market capitalization of the top 50 complexes in Seoul including Banpo Xi, has never fallen below 1 in the past six months since May.

◆Full-scale Decline Starts "From 2023"= Although the number of apartment transactions in Seoul sharply dropped to the 2,000 range in October, indicating a continued transaction slump, most experts do not consider this a full-scale house price decline. Eight respondents (40%) said house prices will not fall for the time being, and another eight (40%) pointed to 2023 or later as the timing for a price drop, indicating that most experts expect the current upward trend to continue until 2023 when supply increases. Loan regulations, supply, and interest rate hikes were cited as factors that could lower house prices, and if prices fall, the outer regions such as provinces and Incheon are expected to be hit first.

Jang Jae-hyun, director at RealToday, said, "During the 2008-2009 house price decline, issues such as the promotion of the 2nd New Town, loan regulations, and interest rate hikes were present, and the current situation is similar," adding, "With the planned supply of the 3rd New Town and the forecasted interest rate hikes, listings will likely appear first in unpopular areas on the outskirts of Gyeonggi-do."

◆Two Years of the Lease Protection Act... Growing Anxiety Over Jeonse and Monthly Rent= Experts pointed out the two lease laws, including the right to request contract renewal and the cap on rent increases, as factors undermining stability in the Jeonse and monthly rent market. When many existing leases expire in the second half of next year, Jeonse and monthly rent prices could surge again. Eleven respondents (55%) predicted that Jeonse and monthly rent prices will rise by more than 5%, while the rest also forecast at least a 2% increase, reflecting these concerns. According to KB Bank, the average Jeonse price for Seoul apartments surpassed 600 million KRW for the first time in March and reached 662.44 million KRW in November. If this trend continues, the average Jeonse price for Seoul apartments will exceed 700 million KRW next year, surpassing the Gyeonggi-do apartment sale price (as of November, 601.9 million KRW).

Lim Byung-chul, senior researcher at Real Estate R114, said, "Due to the new lease laws and tax increases, tax shifting has occurred, causing Jeonse and monthly rent prices to keep rising," adding, "If there are no factors to stabilize the market next year, the current upward trend will continue." For this reason, 40% of respondents said that sufficient supply to meet tenant demand is necessary to stabilize Jeonse and monthly rent prices. Most respondents also expected that in Gangnam, Jeonse prices will rise significantly in line with house price increases.

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