Jusan Research Institute: "House Prices Will Rise Next Year... Government Misjudges Demand and Supply"

[Image source=Yonhap News]

[Asia Economy Reporter Ryu Taemin] The Korea Research Institute for Human Settlements (KRHIS) forecasted that the upward trend in housing prices will continue next year. Although the rate of increase is expected to be lower than this year, the cumulative supply shortage and economic recovery are predicted to sustain the rising trend.

At a press briefing on the '2022 Housing Market Outlook and Policy Improvement Directions' held at the Korea Chamber of Commerce and Industry on the morning of the 14th, KRHIS projected that nationwide housing sale prices will rise by 2.5%, and jeonse (long-term lease) prices will increase by 3.5% next year.

KRHIS explained, "This forecast was derived through a projection model considering economic variables such as economic growth rate and interest rates, as well as the housing supply-demand index. Although the rate of increase will be lower than this year, except for some oversupplied areas like Incheon and Daegu and regions with short-term rapid price surges, prices are not expected to turn downward due to cumulative supply shortages and economic recovery."

Regarding the sales market, it is expected that the overall upward trend will continue due to the accumulated supply shortage and ongoing instability in the jeonse and monthly rental markets. However, with the purchase burden becoming very high due to rapid housing price increases, price declines have appeared in some areas within Seoul and the metropolitan area, as well as in Daegu and other provincial metropolitan cities, so the rate of increase is expected to shrink significantly.

On the jeonse and monthly rental market, KRHIS stated, "Due to the reduction in supply caused by the 'Lease 3 Act,' decreased move-in volumes in some areas such as Seoul, and rapid increases in sale prices, jeonse prices have risen sharply this year, and this trend is expected to continue next year."

KRHIS also revealed that over the past 10 years, the factors having the greatest impact on housing price fluctuations were, in order, the housing supply-demand index, economic growth rate, and interest rates. In particular, Seoul experienced an absolute supply shortage and high prices, so the influence of interest rates was small, while the impact of the supply-demand index was significantly greater compared to other regions.

They added, "During the five years of the Moon Jae-in administration (2017?2021), the cumulative nationwide sales supply-demand index was 87.1, and the jeonse and monthly rental index was 96.6, indicating an absolute supply shortage. Especially in Seoul, the sales index was 69.6 and the jeonse and monthly rental index was 80.6, showing a severe shortage."

The supply-demand index estimates housing demand by ▲household increase ▲housing demolition ▲vacancy occurrence, and estimates housing supply for the sales market by ▲apartment pre-sale volumes ▲other housing completion volumes, and for the jeonse and monthly rental market by ▲apartment move-in volumes ▲other housing completion volumes.

The causes of the Moon Jae-in administration's housing policy failures were identified as ▲errors in demand increase judgment based on vague population decline theories and the assumption of '100% housing supply rate achievement' ▲errors in actual supply volume judgment based on 'permit volumes' which have many ongoing variables ▲and overlooking the shortage of public land for housing development.

Regarding the policy direction for the next administration, KRHIS suggested, "The market should be allowed to autonomously handle groups that can be resolved within the market, while the government should focus on groups that are difficult to resolve through the market and implement various support policies. Excessive regulations and punitive taxation that hinder the ownership and transaction of housing, which is the basic asset and living space for ordinary people, must be normalized as soon as possible."

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