Frozen real estate market… Despite the base interest rate cut, ‘winter winds’ expected for some time

The photo shows an apartment complex in Gyeonggi-do. [사진 연합뉴스]

[이코노미스트 이병희 기자] A cold wind is blowing in the domestic real estate market. There are evaluations that the government’s policies to curb the rise in housing prices, such as strengthening lending regulations, are having an effect.

According to the Ministry of Land, Infrastructure and Transport’s ‘October Housing Statistics’, the volume of apartment sales in Seoul last month was calculated to be 4,000 households. Compared to September, it is a 19.2% decrease. The number of apartment sales in Seoul continued to increase after recording 1,790 in December last year, reaching 9,518 in July of this year. However, as the government tightened real estate-related loans, transactions plummeted.

‘Loan regulations’ directly hit the Seoul real estate market. Housing transaction volume in the metropolitan area, including Seoul, recorded 25,011 cases in October, down 3.2% from the previous month. On the other hand, local housing sales transactions amounted to 31,568 households, an increase of 24.1% from the previous month.

The problem is that the number of unsold properties after completion, which are classified as malicious unsold properties, continues to increase. The number of unsold homes nationwide after completion at the end of October was 18,307, an increase of 1,045 homes (6.1%) in one month. This is the highest level in 4 years and 3 months since July 2020 (18,560 households). The region with the largest number of unsold houses with bad properties was Incheon, which nearly tripled in one month from 555 households in September to 1,547 households in October. In addition, Jeonnam recorded 2,480 households, Gyeonggi recorded 1,773 households, and Busan recorded 1,744 households.

It is also worth noting that the number of unsold houses is increasing, especially in the metropolitan area. As of October, the number of unsold houses nationwide was 65,836, a decrease of 1.4% (940 households) from the previous month, which was due to the decrease in unsold houses in local areas. While the number of unsold homes in the provinces decreased by 51,888 households (1.9%), the number of unsold homes in the metropolitan area increased by 13,948 households.

Apartment prices across the country are also continuing to decline. According to the Korea Real Estate Agency’s national weekly apartment price trend for the fourth week of November, as of the 25th, nationwide apartment sales prices fell 0.02% compared to the previous week. Metropolitan areas such as Daegu (-0.12%), Gangwon (-0.08%), Gyeongbuk (-0.06%), Jeonbuk (-0.06%), Busan (-0.06%), Gyeongnam (-0.04%), Daejeon (-0.03%), etc. Real estate prices showed a downward trend in most cities except .

Seoul rose 0.4%, rising for 36 consecutive weeks, but stagnating as the increase decreased. Excluding areas that were leading the upward trend, such as Gangnam (0.13%), Seocho (0.09%), Yongsan (0.08%), and Seongdong (0.08%), real estate price increases in most regions decreased compared to before or remained at a similar level. Experts believe that a combination of factors, such as increased fatigue among consumers with the surge in housing prices, reduced loan limits, and increased loan interest rates, has played a role.

Some predict that this situation will continue for some time. The Bank of Korea is continuously lowering the base interest rate to increase economic growth, but it can only lead to a rise in housing prices or an increase in sales transactions if it leads to a reduction in loan interest rates. A real estate industry official said, “If apartment prices rise again this year and interest rates remain high in a situation where lending is blocked, it will be difficult for home buyers to make a move.” He added, “The cold wave in the real estate market may continue for a while.”

ⓒThe Economist (Unauthorized reproduction and redistribution of ‘The Economist’s economic news for tomorrow’ is prohibited.