No Demand for Home Ownership Even as the 'Autumn Moving Season' Arrives

Seasonal Demand Disappears Due to Gap Investment

High Interest Rates Delay Home Purchases

Apartment Transactions Halve in the First Half of the Year

July-August Marks the Turning Point for a Downward Trend

[Asia Economy Reporter Kim Min-young] As the transaction cliff phenomenon deepens, it seems difficult to expect a 'special demand' during the autumn moving season in the real estate market in the second half of this year. With the increase in gap investment, the housing market has become less seasonal, and the impact of interest rate hikes is so significant that even if the autumn moving season arrives, it is hard for demand for home ownership to revive. Some believe that July and August, when actual buyers typically start moving during the autumn moving season, will be a turning point to judge whether the market is in a downward trend.

According to the Seoul Real Estate Information Plaza on the 15th, the number of apartment sales transactions in the first half of this year was recorded at 7,881. Compared to the second half of last year (16,108 transactions), it has sharply decreased by more than half. In particular, this is the lowest level since related statistics began to be compiled in 2006 for the first half of the year. Furthermore, with the recent big step by the Bank of Korea raising the base interest rate by 0.5 percentage points, there are forecasts that the real estate market transactions will freeze even more in the second half of the year.

Ham Young-jin, Head of the Big Data Lab at Zigbang, said, "In a situation where house prices are likely to remain flat or fall for some time, it is inevitably difficult to make the decision to buy a house with loans while bearing high interest burdens," adding, "With deepening cautiousness in transactions, housing transactions are expected to decline further, and the price downturn market will continue."

Some view July and August, when sales transactions typically pick up ahead of the autumn moving season, as a turning point to judge the trend of the real estate market in the second half of this year and next year. However, due to the transaction cliff phenomenon continuing since the end of last year and recent interest rate hikes, the prevailing view is that seasonal factors will have little meaningful impact on the sales market in the second half. This is because the 'vacation special' for moving before school district formation did not work in the spring of this year or last autumn.

In fact, looking at this year's apartment sales transactions in Seoul, the numbers for January and February, when there is moving demand due to school openings and job transfers, were only 813 and 1,433 respectively. In contrast, January and February of last year recorded 5,758 and 3,836 transactions respectively.

In the case of last year, September transactions were 2,691, which is about one-third less than September 2020 (3,757 transactions). October transactions in the same year were also 2,191, sharply down by about half compared to a year earlier (4,340 transactions). The second half of last year was when the Bank of Korea raised interest rates by 0.25 percentage points in August, marking the first rate hike in 15 months.

For this reason, forecasts that transactions will remain sluggish even during the autumn moving season are gaining strength. Although the government has decided to raise the loan-to-value ratio (LTV) to 80% for first-time homebuyers, it is explained that in an era of high interest rates and a declining market, it will not be easy for housing sales demand to increase.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "Tenants who have used the contract renewal right may develop demand to buy a house due to the rapid rise in jeonse (long-term deposit lease) prices," but added, "However, with the mindset of avoiding the storm, they may delay purchasing a home further, so even if the autumn moving season comes, it will be difficult for demand for home ownership to revive."

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