Real Estate Transaction Freeze and Polarization Worsen... Stock Market Absorbs Big Step Shock

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The real estate market, where listings are accumulating and localized price adjustments are taking place, is expected to plunge into an even more severe transaction freeze due to the impact of the 'Big Step' interest rate hike. Despite the easing of loan regulations and support for first-time homebuyers, these measures are insufficient to reverse the overall downward trend, and the prevailing outlook is that market contraction is inevitable unless the interest rate hike trend reverses.

On the 13th, Park Won-gap, Senior Real Estate Specialist at KB Real Estate, stated, "The housing market will be significantly affected by the interest rate hikes," adding, "Since additional rate hikes are anticipated this year, price declines will continue for the time being." He explained, "Surpassing the 2% benchmark interest rate marks a critical threshold for interest burden," and "The housing price decline will only stabilize once the interest rate hike rally concludes."

Not only the sales market but also the jeonse (long-term lease) market is expected to be impacted. Park said, "Most tenants secure jeonse through loans," and "As demand for high-priced jeonse decreases due to the interest rate hikes, jeonse prices will also show a downward trend similar to sales prices."

However, there are also views that polarization will intensify rather than an overall market crash. Lee Eun-hyung, Research Fellow at the Korea Institute of Construction Policy, said, "With loan regulations tightened as they are now, further interest rate increases will inevitably lead to a contraction in real estate transactions," but added, "There will be no overall market crash or decline as some claim." He noted, "If a total crash occurs, it would not just be a housing price issue but could shake the national economy," and "The government is likely to intervene to ensure a soft landing of the market." He also mentioned, "Polarization based on regional demand will become more apparent."

Im Byung-chul, Senior Research Fellow at Real Estate R114, said, "Areas like Nowon, which saw rapid price increases last year, as well as outskirts of Seoul and places like Dongducheon and Anyang that benefited from GTX developments, are likely to face significant corrections," while "Areas like Gangnam, where loan regulations have traditionally been strict, will be less affected by interest rate hikes." He added, "With the government signaling easing of redevelopment and reconstruction regulations, there is some expectation, and considering the persistent burden of property taxes, the trend of owning a ‘smart single property’ is likely to continue."

The commercial real estate market is also expected to contract. Kim Hyo-sun, Senior Real Estate Specialist at NH Nonghyup Bank, said, "Interest rate hikes reduce rental yields on commercial real estate, increasing the burden on owners with high loan ratios, which is likely to lead to a decrease in transactions."

The stock market appears to be absorbing the Big Step shock smoothly. Around 10 a.m., the time of the base interest rate announcement, the stock market expanded its gains. Since the rate hike was somewhat anticipated, the impact on the market is estimated to be limited. Seo Sang-young, Head of Media Content at Mirae Asset Securities, forecasted, "Price stabilization and the global trend of interest rate hikes have made the Big Step expected, so the impact on the stock market will be limited."

However, experts maintain a cautious view of the stock market, as the Bank of Korea’s Big Step is unlikely to end with this single move. Concerns about a ‘Giant Step’ beyond the U.S. Big Step due to inflation variables are gaining traction, suggesting the Bank of Korea may have to implement additional Big Steps. Seo said, "If Governor Lee Chang-yong’s press conference signals a more hawkish stance than expected regarding the magnitude and frequency of further rate hikes, increased volatility is inevitable."

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