[Second Half Housing Market Review] House Prices in the Second Half: "If You Want to Buy a House, Wait Until Next Year"

The number of districts in Seoul where the average apartment sale price exceeds 50 million KRW per 3.3㎡ has more than doubled in one year. As of November last year, only Gangnam-gu, Seocho-gu, and Songpa-gu among the 25 districts in Seoul had average apartment sale prices exceeding 50 million KRW per 3.3㎡, but last month, Yongsan-gu, Seongdong-gu, Mapo-gu, and Gwangjin-gu were added, making a total of seven districts. The photo shows the view of Seoul apartments from 63 Square. Photo by Hyunmin Kim kimhyun81@

Housing Prices Expected to Remain Stable in the Second Half of This Year

Transaction Freeze Likely to Continue in the Second Half

First-Time Homebuyers May Consider Bargain Sales

This Year Is Not the Right Time to Buy

[Asia Economy Reporters Minyoung Kim, Taemin Ryu] Experts predict that housing prices, which have stopped rising due to concerns over interest rate hikes and economic recession, will remain stable in the second half of the year. The already high housing prices have raised the entry barrier, and the increased burden of financing is expected to continue suppressing buying demand. In particular, the volume of transactions in the second half is expected to continue the transaction freeze seen in the first half, with bargain sales occurring mainly in the outskirts of the Seoul metropolitan area where price adjustments are underway. Accordingly, they advised postponing home purchases until next year. 'Mid-Year Housing Market Review'

Song Seunghyun, CEO of City and Economy, said on the 9th, "While interest rate hikes and perceptions of price peaks act as factors for price declines, the real estate market is a rigid asset, so housing prices are expected to remain stable in the second half." He added, "Reconstruction complexes in Gangnam are products that do not rely on financing, so they will remain stable, but the outskirts of Seoul, where mid- to low-priced homes are concentrated, will be directly affected by interest rate hikes."

Song also said, "Sellers want to sell at high prices, while buyers want to buy cheaply due to the impact of interest rate hikes and supply policies, so despite the easing of capital gains tax, it seems difficult for transaction volumes to increase significantly."

Kim Deokrye, a researcher at the Korea Housing Industry Research Institute, said, "Since there is no sudden factor to increase transaction volume, the market situation will continue to be similar to the first half," and predicted, "The overall atmosphere that housing prices will be adjusted is affecting buyer sentiment, so housing prices are expected to remain stable in the second half."

Lee Hyuncheol, director of the Apartment Cycle Research Institute, said that housing prices have already shown signs of decline since last year and predicted a clear downward trend next year. Lee said, "The decline will officially begin next year," adding, "Transactions will be mainly bargain sales about 20% below market price, and the downward stabilization trend will continue until 2030."

Regarding the view that a solid single property will withstand even during the downturn, Lee said, "Once the housing market enters a downturn, even Gangnam will be helpless," and predicted that Gangnam housing prices could fall by up to 40%.

The biggest reason for predicting a decline is the disappearance of buying demand. Lee explained, "Those who intended to buy homes already purchased them by the end of 2020 and in 2021," adding, "With demand already reduced, homeowners raised asking prices sharply in 2021, creating a situation where buyers could not purchase even if they wanted to."

Park Wongap, senior real estate specialist at KB Bank, predicted, "Statistically, price indices are expected to show slight declines rather than sharp drops, and the transaction freeze will continue," adding, "Transactions will be centered on bargain sales." He said, "Single homeowners will avoid selling at a loss due to loss aversion and disposition effects," and "Even if interest rates rise, listings will come more from multi-homeowners than from single homeowners who have borrowed heavily."

Yoon Jihae, senior researcher at Real Estate R114, said, "Until June, the nationwide apartment price increase rate was 0.6%, with favorable areas such as Seocho, Gangnam, Yongsan in Seoul, and first-generation new towns recording increases of 1-2%," and predicted, "Housing prices will move in a stable or inflation-level range in the second half." Assuming that the ‘2.5 million housing supply plan’ to be announced in August includes easing of reconstruction regulations, favorable areas like Gangnam are expected to firmly defend housing prices in the second half.

Yoon identified first-time homebuyers as the main drivers of the second-half sales market. The government’s June announcement of an 80% loan-to-value (LTV) ratio easing policy for first-time homebuyers has eased their financial constraints. Rather than staying in the unstable jeonse (long-term deposit lease) market, real demand buyers may increasingly choose to purchase, taking advantage of acquisition tax reductions and loan regulation relaxations. She explained, "There is a possibility that buying demand will revive in the Seoul metropolitan area, including Incheon, where prices are adjusting, due to financially capable first-time buyers."

The prevailing opinion was to be cautious about buying a home this year. Senior specialist Park advised, "Buyers should wait and watch for price merits with a bargain hunter mindset," adding, "It would be better to skip this year and consider purchasing a home from next year onward."