Interest Rates Are the Issue... 7 out of 10 People Say "House Prices Will Fall This Year"

Jeonse Expected to Drop 69.5%
Interest Rates Biggest Factor in Decline
Monthly Rent Price Outlook Balanced Between Rise and Fall

[Image source=Yonhap News]

[Asia Economy Reporter Kim Min-young] Last year, the housing market was nothing short of a deep freeze. The ongoing interest rate hikes sharply dampened housing demand, intensifying transaction stagnation, and this trend is expected to continue into this year. When asked about this year's housing price outlook, 7 out of 10 users of the Zigbang application responded that "sale prices will fall." The majority also predicted a decline in jeonse prices, while opinions on monthly rent were evenly split between increases and decreases.

◆ Over 80% of residents in Seoul and five major metropolitan cities expect a decline = On the 2nd, Zigbang conducted a mobile survey targeting 3,089 app users, revealing that 77.7% of respondents overall anticipated a decline. This means 7 out of 10 people expect housing sale prices to drop this year. In contrast, only 10.2% expected prices to rise, while 12.1% predicted prices would remain stable.

By region, the proportion of respondents expecting a decline was over 80% in Seoul (81.5%) and the five major metropolitan cities (80.7%). Gyeonggi (74.8%), Incheon (76.2%), and other provinces (75.3%) showed decline expectations in the 70% range.

The main reason for expecting a drop in housing sale prices this year was the "burden from interest rate hikes," cited by 58.2%, a majority. This was followed by △continued economic recession (19.5%) △perception that current price levels are high (16.4%), among other responses. Most respondents expressed concerns about the burden from interest rate hikes and economic recession, with over 10% perceiving current real estate prices as high.

On the other hand, those who expected housing sale prices to rise mostly cited "expectations for government deregulation" (25.1%). This was followed by △expectations for economic recovery (17.5%) △expectations for a slowdown in interest rate hikes (15.6%) △switching to buying due to rising jeonse and monthly rents (15.2%) △positive factors such as transportation and development plans (12.7%).

◆ Jeonse prices mostly expected to decline... Monthly rents show balanced opinions on rise and fall = This year, 69.5% of respondents predicted that jeonse prices in their residential areas would fall. "Stable" was 17.4%, and "rise" was 13.1%. Although the proportion expecting a decline in jeonse prices was lower than that for sale prices, many still anticipated a drop. By region, Seoul (72.8%) and the five major metropolitan cities (70.2%) showed over 70% decline expectations, while Gyeonggi (68.2%), Incheon (69.5%), and other provinces (66.1%) showed decline expectations in the 60% range.

The main reason for expecting a decline in jeonse prices was also the burden caused by interest rate hikes. The most cited reason for expecting a drop was "decreased jeonse demand due to interest burden on jeonse loans" at 48.7%. This was followed by △perception that current prices are high due to rapid price increases in recent years (18.2%) △risk of returning tenant deposits (12.6%) △increase in jeonse listings related to gap investment (11.1%).

Conversely, the main reason for expecting jeonse prices to rise was "increased jeonse demand due to weakened buying sentiment" (33.1%). This was followed by △shortage of jeonse supply due to landlords preferring monthly rent (23.0%) △shortage of new and newly built jeonse supply (16.3%).

Regarding monthly rent prices in residential areas this year, responses were evenly split with "rise" at 36.6% and "fall" at 36.1%. "Stable" accounted for 27.3%. Slightly more respondents expected a rise. By region, respondents in the metropolitan area mostly expected a rise, while those in the five major metropolitan cities and other provinces mostly expected a decline.

The main reason for expecting monthly rent prices to fall was "increase in monthly rent supply," cited by 52.7%. This was followed by △continued preference for jeonse reducing monthly rent demand (19.7%) △stabilization of jeonse prices and increased supply reducing monthly rent demand (17.1%).

The main reason for expecting monthly rent prices to rise was "increased monthly rent demand due to burden of jeonse loan repayments caused by interest rate hikes," cited by 55.6%. This was followed by △increased switching to monthly rent due to burdens from sale and jeonse prices (14.6%) △shortage of monthly rent supply (13.7%) △increased monthly rent demand due to risk of returning jeonse deposits (11.1%).

Ham Young-jin, head of Zigbang Big Data Lab, said, "Interest rate hikes have acted as a cause, leading to increased cost burdens and decreased demand, resulting in many opinions forecasting a decline." He added, "The proportion of people perceiving current price levels as high is also high for both sale and jeonse prices, which can be interpreted as fatigue accumulating from the rapid price increases over the past one to two years, leading to expectations of a downward adjustment phase."

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