As of last month, the proportion of purchases by inbound investors and corporate purchases, which are barometers of the Seoul real estate market, have both shrunk to the lowest levels in the year. It is interpreted that demand for real estate investment in Seoul has plummeted as lending regulations have been strengthened since September and uncertainty about further increases has increased following a short-term surge in Seoul house prices.
According to a statistical analysis of the Corporate Registration Information Plaza on the 19th, the number of corporate purchases of complex buildings (apartments, multi-family buildings, officetels) in Seoul was 885, the lowest number in the year. The corporation continued its upward trend of purchasing since the beginning of the year by purchasing 1,335 items in June, but it appeared to have decreased its purchase volume for four consecutive months from July to last month. Last month’s transaction volume was similar to April last year (878 transactions). Looking at just last month, the size of corporate purchases has decreased by the same amount as during the period when the downward trend in housing prices in Seoul was extreme.
Generally, corporations purchase real estate for investment purposes. When it is judged that there is room for further increase in real estate prices in the future, the amount of corporate purchases increases. In other words, the reduction in corporate purchase taxes increases when the prospect of a decline in real estate prices is stronger.
Along with the decrease in corporate purchasing power, the purchasing power of local investors in apartment complexes in Seoul also stopped. According to statistics from the Court Registration Information Plaza, the proportion of local investors among apartment buildings in Seoul was 23.97% in October, the lowest of the year. The previous lowest share of investors coming to Seoul this year was 24.48%, but it fell further by 0.51 percentage points (p) in two months. Until the beginning of this year, the proportion of local investors in Seoul averaged around 26%, but when loan regulations began in the second half of the year, it remained at the 24% level since July and fell to 23% last month.
Like corporate purchases, the proportion of local investors purchasing apartment complexes in Seoul also tends to increase when expectations of a rise in real estate prices in Seoul are high. The decrease in local investors can also be interpreted as the effect of foreign investment stopping as it was judged that there was insufficient room for additional housing price increases in Seoul.
Kim In-man, director of the Kim In-man Real Estate Economic Research Institute, said, “In Seoul, there were a small number of unsold houses and a low number of move-ins, so there was a greater expectation that house prices would rise, so there was a lot of demand for local investment.” As the situation worsens starting in September, everyone is taking a step back as uncertainty about the prospects for further increases increases. “It is in the same context that the corporate purchase tax has decreased,” he analyzed.
In fact, the rise in apartment prices in Seoul has decreased for four consecutive weeks, and buying sentiment is rapidly freezing. According to an announcement by the Korea Real Estate Board, apartment prices in Seoul recorded 0.06% in the second week of November (as of the 11th), down 0.01 percentage points from the previous week. In addition, the Seoul housing sales market consumer sentiment index for October announced by the Korea Research Institute for Human Settlements was 117.7, showing a downward trend for three consecutive months after recording 140.6 in July.
Ko Jun-seok, a professor at the Sangnam Institute of Management at Yonsei University’s College of Business, predicted that the wait-and-see trend for real estate purchases in Seoul will continue until the end of the year. Professor Go said, “As the government implemented household loan risk limit management, commercial banks are focusing on managing delinquency rather than additional lending. However, in January of next year, home mortgage loans will resume without any loan limit restrictions,” he predicted. “This adjustment phase will continue until next month, and a rebound will be detected in the outskirts of Seoul starting in January.”
Which will keep the market in a state of flux as investors remain cautious.
As a website editor for world-today-news.com, I would like to conduct an interview with two guests on the current trends in Seoul’s real estate market. Our first guest is Mr. Kim In-man, a real estate expert, and the second guest is Prof. Go Jun-seok from Yonsei University’s College of Business.
Topic 1: The impact of lending regulations on demand for real estate investment in Seoul
Q: How have the recent lending regulations affected the demand for real estate investment in Seoul, particularly among corporate investors and local residents?
Mr. Kim: Corporate investors have reduced their purchases due to uncertainty about further increases in house prices following the surge in recent months. The same can be said for local residents, who are taking a step back due to the decline in housing prices.
Prof. Go: The reduced purchasing power of corporate investors and local residents is a result of the government’s efforts to cool down the housing market through tighter lending regulations. Banks are now focusing more on managing delinquency rather than making new loans. This has created a wait-and-see attitude among potential buyers.
Topic 2: Trends in corporate and local investor purchasing power in Seoul’s real estate market
Q: Can you explain how the decrease in corporate and local investor purchasing power is indicative of market sentiment?
Mr. Kim: When there is a high expectation of a rise in real estate prices, both corporate and local investors tend to increase their purchases. The decrease in their purchasing power suggests a shift in market sentiment, with many investors now questioning whether there is still room for further price increases.
Prof. Go: The decrease in corporate and local investor purchasing power is a result of the market’s uncertainty about future price movements. Investors are waiting for clearer signals before making any significant investments.
Topic 3: Forecasts for the Seoul housing market in the coming months
Q: Do you expect these trends to continue in the short term?
Mr. Kim: Yes, I believe the wait-and-see attitude will persist until the end of the year. The government’s restrictions on lending are likely to continue,
