Newlyweds and Middle-Aged Buyers Both Drop Sharply... Half of Half the Number Bought Homes This Year

Archive photo / Photo by Mun Ho-nam munonam@

Impact of Interest Rate Hikes and Economic Recession

Steep Decline in Housing Prices

Buying Power Disappears Across All Age Groups

[Asia Economy Reporters Kim Min-young, Lee Hyun-joo] As the housing price curve heads downhill, the number of people trying to buy their own homes has significantly decreased compared to two years ago. With a mix of interest rate hikes, transaction freezes, and economic recession, forecasts that housing prices will fall further are spreading. In the market, voices are growing that to revive the frozen real estate market, not only a 'pinpoint regulation' focusing on essential areas but also a soft-landing policy to prevent the emergence of 'empty shell houses' must be implemented simultaneously.

On the 24th, Asia Economy, upon request from Rep. Yoo Kyung-joon of the People Power Party, received data from the Korea Real Estate Board on 'Apartment Sales Status by Buyer Age Group.' According to the data, nationwide apartment sales dropped 38% from 934,078 cases in 2020 to 669,182 cases in 2021, and sales up to August this year amounted to only 225,486 cases, a sharp 75% decrease over two years. Although the sales figures are only up to August, considering that apartment transactions have nearly frozen due to consecutive interest rate hikes, it is expected that transactions will not increase significantly in the second half of the year.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "Even if people want to sell their homes, they cannot, and those without homes will not buy until interest rates rise to a certain level, so the sales market will continue to shrink." He added, "Since the jeonse (long-term lease) ratio is higher than during the global financial crisis, a market soft-landing policy is needed to prevent the occurrence of empty shell houses and empty shell jeonse."

The fervor for apartment purchases has decreased across all age groups. Especially among those in their 30s, who include many newlyweds and have high demand for homeownership, transactions dropped from 227,768 cases in 2020 to 166,281 cases last year, and further shrank to 50,587 cases this year, about one-third of the previous level. The main demand group in the housing market, those in their 40s, also saw a decrease from 257,112 cases in 2020 to 169,838 cases last year, and only 54,142 cases this year, marking a fivefold drop in apartment sales over two years. Overall housing sales, including apartments, decreased from 1,279,305 cases in 2020 to 1,015,171 cases last year, and further down to 385,391 cases this year, about one-third of the previous level.

The reason for the disappearance of buyers is that the housing price decline curve is becoming steeper. According to KB Kookmin Bank's housing price trend survey, the average nationwide housing price (including apartments, row houses, multi-family houses, and detached houses) fell by 0.55% compared to the previous month. This decline is more than three times larger than last month's (-0.16%). Seoul housing prices also dropped by 0.45%, marking the third consecutive month of decline following last month's (-0.08%). The rate of decline has expanded more than fivefold compared to last month.

Expectations that 'housing prices will fall further' remain strong. The nationwide sales price expectation index fell from 69 last month to 65 this month. The index also dropped in the metropolitan area: Seoul (61→59), Gyeonggi (66→62), and Incheon (63→61). The KB Real Estate Price Expectation Index surveys about 4,500 real estate agencies nationwide to quantify the outlook on housing price increases or decreases in their areas. A value above 100 indicates a higher expectation of price increases, while below 100 indicates more expectations of price declines.

Rep. Yoo said, "Considering the funding crunch caused by the Gangwon-do Legoland incident and the trend of interest rate hikes, the 'transaction cliff' phenomenon is expected to continue for the time being." He emphasized, "Since a sharp drop in real estate prices may follow the transaction cliff, unnecessary real estate regulations should be reviewed to proactively open up the frozen real estate market."

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