[Opinion] The Discrepancy in Real Estate Statistics

Changmu Lee / Professor, Department of Urban Engineering, Hanyang University

The disconnect between the price changes felt in the market and the perceptions of policymakers within the government continues to be a subject of debate. The root of the controversy lies in the Housing Price Trend Survey conducted by the Korea Real Estate Board. Recently, this statistic caused an uproar when Minister of Land, Infrastructure and Transport Kim Hyun-mi claimed that the apartment price increase rate in Seoul during the Moon Jae-in administration was only 11%. Another official national statistic at the same point in time, the Apartment Actual Transaction Price Index, showed a 45% increase, intensifying the controversy.

Watching the recent debates about the Seoul apartment price increase rate brings to mind an incident from 2006 when actual transaction data began to accumulate domestically for the first time through the real estate transaction reporting system. The government expected that by disclosing actual transaction prices, the incentive for price hikes based on asking prices would disappear. At that time, just like now, it was a critical moment following a series of unsuccessful measures by the Roh Moo-hyun administration, with the 8.31 measures announced to stabilize the market. Calculating the average actual transaction price, apartment prices in Gangnam showed a 14% decline over four months starting from March 2006, and the Ministry of Construction and Transportation announced this as evidence of market stabilization.

However, a media outlet analyzed the data differently by connecting only cases of repeated sales within the same apartment complex?a concept similar to the repeat sales index?and found that prices actually rose by 5.7%. This led to a dispute between the Ministry of Construction and Transportation and the media, escalating tensions. The conclusion was that during that period, there was a surge in prices according to both private market price indices and the subsequently released actual transaction price index. The drop in average prices was due to a surge in transactions of relatively cheaper apartments as multi-homeowners adjusted their assets in response to the strengthened comprehensive real estate tax under the 8.31 measures.

Recently, the government has reignited controversy by asserting that the Seoul apartment market has entered a stable phase based on the Korea Real Estate Board’s weekly housing price trend survey, which shows almost no price changes. However, unlike the Board’s statistics showing only a 0.6% change since June, the KB Kookmin Bank price index rose by 6.5%, and the Real Estate 114 price index increased by 4.5%.

Calculating the cumulative change from the end of January 2013, when price trends stabilized, to the end of July this year reveals an even more severe discrepancy. The Korea Real Estate Board’s monthly housing price trend survey shows only a 30% increase during this period, while the KB Kookmin Bank index shows 42%, the Real Estate 114 index shows 103%, and the Apartment Actual Transaction Price Index shows a cumulative increase of 97%, similar to the Real Estate 114 index.

The gap is too significant to be dismissed as merely a difference in the characteristics of each statistic, and a clear evaluation will be necessary going forward. In particular, the persistent undervaluation tendency of the government’s official housing price trend survey is serious. This may stem from the limitations of a sample-based index, where sample adjustments cannot quickly reflect changes in market inventory. The KB Kookmin Bank index, which is also sample-based, shows a similar undervaluation tendency. The Real Estate 114 index, which is freer in sample selection and adjustment processes and can quickly reflect changes in the population, is actually more similar to the actual transaction price index.

Contrary to the Korea Real Estate Board’s claims, it cannot be confidently asserted that surveyors’ judgments are more accurate than those of specialized brokers in the relevant complexes who recognize actual transaction cases before they are reported. Observing that the price indices lag behind the actual transaction price index also makes it difficult to argue that asking prices drive price increases.

Ensuring the independence of statistical agencies is also a fundamental premise. Monopoly in statistics is a risky choice. Ultimately, to support rational choices by the market and government, it is important to create an environment where the qualitative level of statistics can be maintained through a competitive structure.