KDI "1st Quarter Housing Sales and Rental Market in Downward Adjustment Phase"

[Asia Economy Sejong=Reporter Son Seon-hee] The Korea Development Institute (KDI), a government-funded research institute, evaluated on the 2nd that the real estate market in the first quarter remained in a downward adjustment phase following the fourth quarter of last year.

In its 'Real Estate Market Trends' report released that day, KDI diagnosed, "Since September last year, mortgage loan interest rates have risen rapidly and financial regulations have been strengthened, leading to a decrease in household purchase demand and a continuous reduction in the increase of mortgage loans."

In the first quarter, nationwide housing sale prices recorded a 0.14% increase, lower than the previous quarter (1.8%), as the rate of increase narrowed in most regions across the country. The quarter-on-quarter housing price increase rates were 2.58% in Q1 2021, 2.76% in Q3, and 1.81% in Q4. Compared to the same period last year, the increase rate was 7.5%, also lower than the previous quarter (9.9%).

By region, the metropolitan area and the five major provincial metropolitan cities turned to a decline. In particular, the price decline of apartments was relatively significant.

Regarding the jeonse (long-term lease) market, KDI stated, "The nationwide housing completion volume increased significantly in the fourth quarter of last year, accumulating rental supply and causing jeonse prices to shift to a downward trend." It also analyzed, "In Seoul, about half of the apartment move-in volume scheduled for this year was concentrated in the first quarter, resulting in a relatively larger decline in jeonse prices compared to non-metropolitan areas."

Looking ahead to the housing market outlook, KDI predicted, "Downward pressure on sales and jeonse markets due to interest rate hikes will continue nationwide," but also noted, "Locally, volatility in the rental market may expand depending on supply conditions."

KDI emphasized that if the Bank of Korea's base interest rate continues to rise, leading to an increase in related policy rates, it will act as downward pressure on sales and jeonse prices. On the supply side, the apartment supply volume this year is expected to slightly increase compared to last year, so upward pressure is not expected to be significant.

However, KDI pointed out, "Although the volume of apartment move-ins in non-metropolitan areas is expected to increase in the second quarter, in Seoul, apartment supply is expected to decrease sharply in the second quarter, which may cause upward pressure on housing costs, so caution is needed."

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