Won Hee-ryong: "Real Estate is a 'Jonbeo' Situation... Prepared for Up to 100,000 Unsold Units"

Only a Very Small Volume Could Spread to a Financial Crisis
It's Too Early to Talk About a Trend Reversal

Won Hee-ryong, Minister of Land, Infrastructure and Transport, stated, "Although the (increasing) slope will be gradual, we are predicting or prepared for unsold housing units to reach 100,000."

[Image source=Yonhap News]

Minister Won made these remarks on the 21st while attending the 10th Yonhap News TV Economic Symposium themed "Real Estate-Induced Financial Crisis, Solutions for a Soft Landing."

As of the end of January, the number of unsold houses nationwide reached 75,359 units, marking the highest level in 10 years and 2 months.

Minister Won mentioned Daegu, where there is a large volume of unsold units, explaining, "Although 17,000 unsold units sound alarming, Daegu experienced a surge in reconstruction and redevelopment projects during 2020-2021."

He assessed that the accumulated unsold units in Daegu are unlikely to spread into a corporate financial crisis. Minister Won said, "About 60% of Daegu's unsold units are held by relatively large corporations, so only a very small portion could potentially lead to a corporate financial crisis."

He added, "This is different in nature from a 'financial crisis triggered by unsold units,' where even high-quality large-scale projects face unsold units during a financial crisis, paralyzing the entire market and causing a broader economic crisis."

Regarding the current real estate market situation, he said, "It is too early to talk about a major reversal," adding, "Prices for sale and asking prices are still higher than surrounding market prices and what consumers are willing to wait for."

Minister Won explained, "Sellers are boldly setting prices for sale and asking prices, while buyers are adopting a so-called 'jonbeo' (a slang term meaning to endure until the end) stance, waiting to see how far prices will drop, so the market is still largely in a wait-and-see mode."

He also addressed the possibility that instability in the jeonse and monthly rental markets could act as a downward pressure on housing prices. Minister Won explained, "Since actual demand for jeonse and monthly rent is trending downward, it may be a factor pushing prices down."

Minister Won stated, "When the private sector is too contracted, the Korea Land and Housing Corporation (LH) will try to smooth the slope of fluctuations by pulling forward supply and selling units."