Second Public Institution Relocation... Could It Be a Downside for the Seoul Metropolitan Area Housing Market Showing Signs of Recovery?

Up to 360 Public Institutions Including Bank of Korea to Relocate to Provinces
Concerns Over Housing Demand Gap in Seoul Metropolitan Area
Meanwhile, Local Real Estate Market Expected to Benefit

[Asia Economy Reporter Kim Min-young] There are concerns that the relocation of up to 360 public institutions to local areas, promoted by the government, could act as a negative factor for the recovery of the metropolitan area housing market. This is because when employees of public enterprises, who are a demand group with stable income and purchasing power, move to local areas, a gap in housing demand in the metropolitan area may occur. Conversely, in local housing markets where polarization is intensifying, long-term residential purchases are likely to increase, which is expected to be beneficial.

The National Balanced Development Committee plans to start the second phase of public institution relocations as early as the second half of this year, after consulting with the Ministry of Land, Infrastructure and Transport in the first half regarding the original positions and selection criteria for the relocations, which is one of the 120 national tasks of the Yoon Seok-yeol administration. Up to 360 public institutions are being considered for relocation, including the Korea Development Bank, Bank of Korea, Financial Supervisory Service, and Export-Import Bank. Woo Dong-gi, chairman of the National Balanced Development Committee, said at an invited discussion last November, "The relocation of 360 medium-sized public institutions with 200-300 employees will become visible from the end of 2023."

Concerns have been raised that the second phase of public institution relocations, starting at the end of this year, could be "another major negative factor in the metropolitan housing market." This is because employees of public enterprises are a purchasing group capable of buying homes, and if they move to local areas, it could affect housing demand in the metropolitan area.

According to the Korea Real Estate Board, in January, the comprehensive housing sale prices (apartments, row houses, detached houses) in the metropolitan area fell by 1.86%, and in Seoul by 1.25%. Although the decline narrowed somewhat due to the effects of the 1·3 measures, the downward trend continues. While transaction volumes have shown some recovery, they remain at a cliff level compared to previous years. According to Real Estate R114, the number of apartment sales contracts in the metropolitan area in January this year was 6,647, a 36.1% increase from the previous month (4,882). The average transaction volume for January in the metropolitan area over the past three years was 22,182. Although house prices and transaction volumes are rebounding due to eased loan regulations and the lifting of regulatory zones in the metropolitan area following the 1·3 real estate measures, there is concern that public institution relocations could pour cold water on this trend amid uncertainty about its continuation.

Seo Jin-hyung, professor of MD Product Planning Business at Gyeongin Women's University and co-representative of the Fair Housing Forum, said, "Public institution employees will not immediately sell their homes in Seoul and the metropolitan area just because of the relocation to local areas. However, it is likely that demand in the metropolitan area will decrease as they may trade up to better places or buy an additional home."

Park Won-gap, senior real estate specialist at KB Kookmin Bank, said, "It is unclear how much impact the second phase of public institution relocations will have on the metropolitan housing market. However, it is certain that the large-scale movement of a population with strong purchasing power from the metropolitan area to local areas will at least act as a factor delaying the recovery of the metropolitan housing market."

On the other hand, the local housing market is expected to benefit. The population movement of these public institutions is likely to increase housing demand within the region, creating capacity to absorb supply. Additionally, as the population increases, demand for jeonse and monthly rent will arise, and investors will be attracted, revitalizing the real estate market. The key factor is the scale of the population movement.

Park said, "This is a factor that can bring warmth to the stagnant local housing market. In fact, while the metropolitan housing market struggled with the house poor problem in 2011-2012, the local market flourished."

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