Geonsanyeon "Nationwide House Prices to Fall 2.0% Next Year... Minimal Impact from General Election and GTX"

"Prolonged High Interest Rates Expected to Reverse Housing Market Decline"
Jeonse Prices Forecasted to Rise 2.0% Due to Increased Purchase Demand

Amid the prolonged high-interest rate trend, it is forecasted that housing sale prices will decline by 2.0% next year. The impact of the general election and the opening of the 수도권광역급행철도 (GTX) is expected to be minimal.

Kim Seong-hwan, Associate Research Fellow at the Korea Construction Industry Research Institute, is presenting the housing and real estate market outlook at the "2024 Construction and Real Estate Market Outlook Seminar" held on the 1st at the Construction Hall in Gangnam-gu, Seoul. / Photo by Noh Kyung-jo

On the 1st, Kim Seonghwan, Associate Research Fellow at the Korea Construction Industry Research Institute, stated at the '2024 Construction and Real Estate Market Outlook Seminar' held at the Construction Hall in Gangnam-gu, Seoul, "As the high-interest rate trend prolongs, the housing market will once again turn downward."

Associate Research Fellow Kim explained, "Until the third quarter of this year, the market trend showed a low point after the lowest-priced properties at the beginning of the year were exhausted. Due to greater-than-expected housing market liquidity from special Bogeumjari loans and long-term mortgage loans, housing prices rose mainly in the 수도권 (Seoul metropolitan area). However, due to still burdensome price levels, concerns over prolonged high interest rates, and economic slowdown, prices are expected to stabilize in the fourth quarter and then decline next year in both 수도권 and 지방 (provincial areas)."

He anticipated that the rate of change would not be high. He said, "The real estate market trend is unlikely to change significantly around the general election in April next year," adding, "Although there are events such as the GTX opening, these are already reflected in the housing prices of the respective areas." However, he urged attention to the market trend, noting, "Since policy sensitivity is high, if additional regulatory relaxations occur, the market situation could change."

Regarding housing jeonse (long-term lease) prices, they are expected to fall by 4.8% this year but rise by 2.0% next year. Associate Research Fellow Kim said, "Jeonse loan interest rates are falling, and there is expected to be an influx of jeonse demand due to reduced sales demand," explaining, "With a slight decrease in move-in volumes, jeonse prices will rise."

On the issue of deposit non-return, known as jeonse fraud, he assessed, "It affects the sentiment in non-apartment markets such as row houses and multi-family houses, intensifying apartment concentration in certain areas, but it is not enough to impact overall market prices."

Meanwhile, domestic construction orders next year are projected at 187.3 trillion won, and construction investment at 260.7 trillion won, decreasing by 1.5% and 0.3% respectively compared to this year. Construction orders, which recorded a record high of 229.7 trillion won last year, have decreased by 17.3% to 190.1 trillion won this year.

By sector, public orders are expected to increase by 4.6% due to large civil engineering projects such as GTX construction and the Gadeokdo New Airport project, but private orders are forecasted to decrease by 4.0% year-on-year amid the continued high-interest rate environment.

Research Fellow Park Cheolhan of the Korea Construction Industry Research Institute said, "Funding difficulties, including issues with real estate project financing (PF), are expected to continue due to high interest rates," adding, "With increased domestic and international uncertainties, a rebound in private orders is difficult, so construction orders will decline for the second consecutive year."

Furthermore, construction investment is expected to turn downward around the first half of next year. Research Fellow Park advised, "For economic recovery, the government’s active role in infrastructure investment and stabilizing the construction finance market is required," and added, "Construction companies need to prepare to avoid sudden liquidity problems and respond to uncertainties by securing prime urban project sites."

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