Housing Outlook Index Hits Lowest in 1 Year and 8 Months

January Index at 100, Declining for 5 Consecutive Months... "Real Estate Price Upward Trend Broken"

[Asia Economy reporters Seo So-jeong and Moon Je-won] Amid the continued sharp decline in asset markets such as stocks and cryptocurrencies, the Housing Price Expectation Index (CSI) has fallen for the fifth consecutive month, reaching its lowest level in 1 year and 8 months. The combined effects of government household loan regulations, base interest rate hikes, and a winter freeze in asset markets are strengthening expectations of a decline in real estate prices.

According to the "January Consumer Sentiment Survey Results" announced by the Bank of Korea on the 26th, the Housing Price Expectation Index dropped 7 points from the previous month to 100, marking a decline for five consecutive months. This is the lowest level in 1 year and 8 months since it recorded 96 in May 2020. It means that the proportion of respondents who expect housing prices to rise has significantly decreased compared to the previous month.

The movement of interest rates, a major variable in the real estate market, is also unusual. The interest rate level expectation for this month rose 2 points from the previous month to 139, reaching the highest level again in two months. The previous record was 138 in November last year.

Ko Jong-wan, president of the Korea Asset Management Research Institute, said, "Since real estate is usually analyzed based on six months of statistics, the fact that the Housing Price Expectation Index has fallen for five consecutive months is meaningful," adding, "The long-term upward trend in real estate prices is breaking."

President Ko explained, "Various factors such as supply and demand and policies affect the real estate market, but the most important factor recently is interest rates," and added, "In 2019, the rapid rise in housing prices was due to interest rate cuts and liquidity expansion, but now the situation is the opposite." Although liquidity absorption through government fiscal expansion has not yet been fully implemented in Korea, considering overseas trends such as in the United States, it is highly likely to occur sequentially in the future, and this change indicates that the transition from a rising market to a declining market is imminent.

Meanwhile, the Consumer Confidence Index (CCSI), which comprehensively shows economic life sentiment, rose 0.6 points from December to 104.4 this month. As COVID-19 risk decreased due to strengthened quarantine measures, consumer sentiment improved compared to the previous month.