"House Prices to Fall an Additional 0.7% in Second Half... Construction Orders Continue to Slump"

Geonsanyeon Predicts 4.8% Annual Decline in House Prices This Year
"Interest Rate and Price Burden Persist, Economic Slowdown Impact"
Jeonse Prices Expected to Fall 2.0% in Second Half... Decline Slows

It is forecasted that nationwide housing prices will fall an additional 0.7% in the second half of this year, resulting in an annual decline of 4.8%.

Kim Seong-han, Associate Research Fellow at the Korea Construction Industry Research Institute, is presenting the housing and real estate market outlook at the "2023 Second Half Construction and Real Estate Market Outlook Seminar" held on the 26th at the Construction Hall in Gangnam-gu, Seoul. / Photo by Noh Kyung-jo

On the 26th, the Korea Construction Industry Research Institute stated at the '2023 Second Half Construction and Real Estate Market Outlook Seminar' held at the Construction Hall in Gangnam-gu, Seoul, that while the decline in the metropolitan area is expected to improve in the second half, difficulties will persist in provincial areas, making it difficult to expect a recovery in the housing market.

Kim Seonghwan, a senior researcher at the institute who presented the housing and real estate market outlook that day, explained, "In the first half, market downward pressure eased somewhat due to deregulation, and over 30 trillion won in policy financing flowed into the market, reducing the decline compared to the previous year. However, due to still burdensome interest rates and prices compared to the past, as well as economic slowdown, it is difficult to expect sustained transaction activation." He added that movement by single-homeowners is also too weak to stimulate the market.

By region, a stable trend is expected in the metropolitan area, while declines are anticipated in provincial areas. "In some regions, the lowest-priced listings have been exhausted, marking a bottom followed by slight increases, so a mixed pattern of rises and falls due to base effects centered on the metropolitan area is expected," he said.

However, he cautioned against excessive focus on price increases in certain parts of Seoul. Kim emphasized, "It is difficult to say that the macroeconomic environment affecting housing price declines has significantly improved compared to last year, so rather than focusing solely on prices, it is necessary to check the overall conditions surrounding the market."

Jeonse (long-term lease) prices are also forecasted to fall by about 8.0% nationwide annually. Following a 6.0% decline in the first half, a further 2.0% drop is expected in the second half.

Kim said, "A slowdown in the decline is expected compared to the first half, as additional demand is anticipated to flow into the rental market due to reduced purchase demand. Although issues related to the return of jeonse deposits may continue in the second half, they are not expected to exert downward pressure on overall market prices."

Meanwhile, regarding domestic construction orders, the institute predicted a 6.6% decrease in the second half, resulting in a 12.9% annual decline compared to the previous year. Construction orders had increased for four consecutive years from 2019 to 2022, reaching a record high of 229.7 trillion won last year. However, this year, with the government’s social overhead capital (SOC) budget cut by more than 10% and a sluggish housing market, orders are expected to total 200.1 trillion won.

Park Cheolhan, a researcher at the institute, said, "Although construction investment increased by 1.8% in the first half, it is expected to decline by 0.2% in the second half, showing a weakening trend toward the end of the year. To revive the construction market, measures such as stabilizing material prices, reflecting realistic construction costs, minimizing risks in real estate project financing (PF), and expanding the government’s SOC budget are necessary as economic stimulus policies utilizing the construction industry."

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