Interest Rate Hike Causes 'Transaction Cliff'... Housing Transactions Down 36.2% in April-May This Year

KDI Announces Real Estate Market Trends

[Image source=Yonhap News]

[Asia Economy Sejong=Reporter Kwon Haeyoung] Nationwide housing sales transactions from April to May this year have decreased by nearly 35% compared to a year ago, indicating a deepening 'transaction cliff' phenomenon in the real estate market.

According to the 'KDI Real Estate Market Trends' released on the 28th by the Korea Development Institute (KDI), housing sales transactions in April-May recorded 122,000 units, down 36.2% from the same period last year (191,000 units).

The nationwide housing sales volume also decreased by 21% compared to the average for the same period over the past three years (154,000 units). In the metropolitan area, centered on Northeast Seoul, Gyeonggi, and Incheon, transactions fell 46.3% to 50,000 units, while in non-metropolitan areas, mainly Daegu and Daejeon, transactions decreased by 26.7% to 72,000 units across most regions.

KDI explained, "Due to uncertainty about further interest rate hikes, buyers have remained cautious, leading to a sharp decline in sales transactions," adding, "Housing sales transactions in April-May fell by 30% compared to the booming housing market in 2020-2021."

By housing type, apartment sales transactions decreased by 39.8% to 73,000 units, and multi-family and row houses dropped by 28.5% to 31,000 units. By age group, the share of transactions by those aged 30 and under was 24.7%, continuing a downward trend from 27.8% in Q3 2021, 25.7% in Q4 2021, and 25.3% in Q1 this year.

Along with the transaction cliff caused by interest rate hikes, both sales and jeonse (long-term lease) prices nationwide are under downward pressure. The metropolitan area housing price index fell by 0.05% compared to the previous quarter, a larger decline than the previous quarter's (-0.01%), and the jeonse price index also dropped by 0.09%, continuing the downward trend from the previous quarter (-0.14%). The non-metropolitan housing price index rose by 0.17%, but the increase was smaller than the previous quarter (0.28%), and the jeonse price index increased by 0.04%, also showing a reduced rise compared to the previous quarter (0.22%).

KDI forecasted, "Due to rising interest rates on mortgage and jeonse loans, downward pressure on sales and jeonse prices will continue," and added, "With growing domestic and international inflation concerns and increased uncertainty about the end point of interest rate hikes, housing sales transactions are likely to stagnate for the time being."

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