69% Expect 'House Prices to Rise' Next Year... 77% Say Jeonse Will Increase

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[Asia Economy Reporter Yuri Kim] It has been found that the prevailing outlook is that house prices and jeonse prices will continue to rise in the first half of next year.

According to Real Estate 114 on the 3rd, a survey titled 'Housing Market Outlook for the First Half of 2021' was conducted over 15 days from November 9 to 23, targeting 1,439 people nationwide. The results showed that 69% of all respondents expected housing sale prices to rise in the first half of next year. For jeonse prices, 77% of respondents anticipated an increase. Compared to the previous survey, where 49% of respondents expected sale prices to rise and 63% expected jeonse prices to increase, the proportion anticipating a rise has significantly grown.

This is the highest proportion of respondents expecting a rise since Real Estate 114 began related surveys in 2008. On the other hand, those forecasting a decline accounted for only 5-7% of all respondents (7.51% for sales, 5.42% for jeonse). Real Estate 114 analyzed that despite the government announcing various regulatory policies, housing prices have steadily increased contrary to expectations, influencing consumer responses.

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Regarding reasons for the rise in sale prices, about half of the responses (45.52%) cited 'Rising apartment prices in Seoul and the metropolitan area.' This is interpreted as the Seoul area and nearby Gyeonggi and Incheon regions leading price increases since the first half of 2020. The next highest response was 'Worsening supply shortage in central Seoul' (27.69%), as apartment supply in Seoul and the metropolitan area is expected to significantly decrease in 2021. Additionally, the balloon effect on less risen areas (16.14%), expectations of domestic economic recovery in the first half of 2021 (4.38%), and revitalization of the apartment pre-sale market (3.59%) were also selected as factors contributing to housing price increases.

Meanwhile, among respondents who expected sale prices to decline, 26.85% cited 'Possibility of macroeconomic recession' as the main reason. Due to COVID-19 this year, both domestic and global economic growth rates turned negative, raising concerns that this could lead to a downturn in the real economy, including real estate. Other reasons for decline included increased selling volume due to tax burdens (25.0%), lack of transactions due to price burdens (21.30%), increased listings from rental business operators and multi-homeowners (10.19%), weakened buying demand due to loan regulations (8.33%), and expectations of pre-sale and public housing supply (7.41%).

Among the 1,116 respondents who expected jeonse prices to rise, 31.09% attributed this to the implementation of parts of the Three Lease Laws (right to request contract renewal, rent ceiling system). The new lease law, implemented at the end of July 2020, reorganized the jeonse and monthly rent market around contract renewals, noticeably reducing jeonse listings. The response 'Supply shortage of jeonse properties due to landlords' preference for monthly rent' (24.82%) was also high. Due to prolonged historically low interest rates and issues of increased property taxes, landlords are converting to monthly rent faster than before. Following this were shortages of new supply in popular areas like Seoul (19.18%), increased jeonse demand due to weakened buying sentiment (17.20%), and temporary jeonse residence increases for subscription purposes (5.56%).

On the other hand, those expecting jeonse prices to fall mainly cited 'Risk of returning tenant deposits due to high jeonse prices' (33.33%). Recently, cases where jeonse prices approach or exceed sale prices have occasionally appeared, leading to a significant increase in cases where jeonse deposit insurance companies returned deposits on behalf of landlords. Other reasons for jeonse price declines included the government's announcement of measures to stabilize the jeonse and monthly rent market (28.21%), increased jeonse listings due to gap investment (23.08%), and decreased jeonse demand due to conversion to sale of existing homes (15.38%).

Additionally, about 3 out of 10 respondents selected 'Whether government real estate regulations such as loans and taxes will continue' (26.75%) as a major variable for the first half of 2021. The government plans to raise the market reflection ratio of official property prices to around 90%, and holding tax burdens on multi-homeowners are expected to increase significantly. Tax burdens have increased especially among owners of high-priced homes in Seoul, the metropolitan area, and major cities.

Other major variables selected included 'Domestic and international economic recovery speed and external economic conditions' (17.16%). Due to COVID-19, negative growth was inevitable in 2020, but a 2-3% growth rate is expected in 2021 due to the base effect. However, it is difficult to predict the end of COVID-19, so it is necessary to observe whether the macroeconomic recession period will continue.

The next variable selected was 'Whether the unstable trend in jeonse prices will continue' (16.19%). Yoon Ji-hae, senior researcher at Real Estate 114, said, "Since the implementation of the new lease protection law, the rise in jeonse prices has exceeded the rate of change in sale prices, acting as a variable stimulating sale prices as well. If the unstable trend in jeonse prices calms early, the sale market is likely to stabilize, but if early stabilization is difficult, demand to switch from jeonse to sale may increase, pushed by the jeonse market."

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