[2024 Real Estate Outlook] 5 out of 10 Experts Predict 'Sangjeohago' Rise... The Variable is the Timing of Interest Rate Cuts

Expected US Fed Rate Cut Around Q2
Demand Sentiment Recovers and Rebounds Due to Supply Shortage
Economic Recovery and Post-Election System Reforms Also Variables
Seoul and Capital Area Up 1-3%
Stable or Declining in Regions Due to Oversupply

Experts have mixed opinions on the outlook for the real estate market in 2024. While some predict a rise in housing prices, others argue that the bottom is still far off and the downward trend will continue. Among these, a slight increase is the prevailing view. Five out of ten experts forecast a slight rise. Despite the continued stagnation in the real estate market, evidenced by a sharp decline in transaction volume since the second half of last year, they predict a 'low in the first half, high in the second half' scenario, with increased demand for sales due to interest rate cuts and reduced supply starting in the second half of this year.

On the 2nd, Asia Economy Newspaper surveyed 10 experts from academia and real estate professionals on the '2024 Real Estate Market Outlook.' Five out of ten predicted an increase, three expected stability, and two anticipated a decline. Seoul and the metropolitan area are expected to see a 1-3% rise, while the provinces are likely to experience stability or decline due to oversupply.

Interest Rate Cuts Expected to Trigger Market Upswing in Second Half

Most experts predicting a rise foresee a turnaround starting in the second half, anticipating a cut in the U.S. Federal Reserve's (Fed) benchmark interest rate. Doo Sung-kyu, CEO of Mokmin Economic Policy Research Institute, said, "If the U.S. starts cutting rates around the second quarter, demand sentiment will recover," adding, "In the mid to long term, housing supply will decrease, and rising construction costs due to increased raw material and labor costs will continue to push up sale prices, prompting buyers to return to the real estate market to secure housing earlier."

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, explained, "High interest rates, supply shortage anxiety, aftereffects of high pre-sale prices, special loans for newborns, and interest rate cuts are playing a seesaw game," adding, "In the first half, high interest rates will persist, and concerns over project financing (PF) defaults will psychologically cool the market."

Experts identified interest rates as the biggest variable influencing the real estate market next year. The timing of interest rate cuts could mark the market's rebound point. Kim Kyu-jung, Director of Asset Succession Research at Korea Investment & Securities, said, "The impact of this year's rate cuts has already been reflected in the asset market, and if the speed and magnitude of rate cuts fall short of expectations, recovery in the second half may be delayed or further adjustments may occur."

Meanwhile, several experts also focused on economic recovery and changes in tax and policy after the general elections. Doo Sung-kyu noted, "If the economy enters a full downturn or raw material prices and oil prices show sharp volatility, the real estate market will face limitations in recovery despite institutional improvements and regulatory easing."

Yoon Ji-hae, Senior Researcher at Real Estate R114, said, "With both pre-sale and move-in volumes decreasing, regulatory easing pledges ahead of the general elections, and expectations of U.S. interest rate cuts, there is a possibility of price increases," but added, "Due to concerns over PF defaults and unsold units, significant price rises are unlikely." Han Moon-do, Professor of Real Estate at Seoul Digital University, who predicted a decline, analyzed, "Currently, housing prices are overvalued based on indicators, and if various risk factors materialize, the decline could deepen."

Seven out of Ten Experts Predict Rise in Seoul... Many Forecast 1-3% Increase

Regarding the Seoul real estate market, seven out of ten experts predicted a rise. Four forecast a 1-3% increase, and two expect a 3-5% rise. This is due to a shortage of apartment supply in Seoul, around 10,000 units, and the expectation that rising jeonse (long-term lease) prices will drive up sales prices. Ko Jong-wan, Director of Korea Asset Management Research Institute, explained, "In Seoul, from the second half onward, interest rate cuts, real economic recovery, and shortage of move-in units will increase transactions, and rising jeonse prices will likely lead to a rise in sales prices." Yang Ji-young, Director of Yang Ji-young R&C Research Institute, said, "Expectations for projects like New Town Planning and Moa Town are further reflected, potentially increasing the magnitude of price rises."

More than half of the experts (six) also predicted a rise in the metropolitan area market. Although supply is greater than in Seoul, they expect supply shortages to worsen and GTX development to drive price increases.

Unlike Seoul and the metropolitan area, the provincial real estate market, where unsold units are increasing, saw many opinions favoring stability or decline. Kim Kyu-jung explained, "With ongoing unsold unit burdens, weak demand from the 20s to 40s age group, and worsening local economic conditions, prices are expected to remain stable." Ko Joon-seok, Associate Professor at Yonsei University Sangnam Graduate School of Business (CEO of J-Edu Investment Advisory), said, "Unlike Seoul and the metropolitan area, even if interest rates are cut, prices will likely remain stable." Yang added, "In the provinces, oversupply and a recent sharp increase in unsold units after completion are lowering occupancy rates, which could cause price declines."

Many experts mentioned that the duration of the real estate downturn would be 'within one year.' Some forecast price adjustments could begin as early as the second half of this year. Director Ko Jong-wan said, "Looking at the real estate market cycle, there is a prevailing theory of 5-6 years of rise followed by 4-5 years of decline, and the probability of switching to an upswing around 2025 is high." Professor Han Moon-do explained, "The adjustment period to a reasonable price varies depending on factors such as real estate PF and global conditions."

Redevelopment in Seoul and GTX in Metropolitan Area Seen as Positive Factors

From an investment perspective, notable areas in Seoul include Apgujeong and other Gangnam 3 districts, Yeouido, Yongsan (Hannam-dong), and Mok-dong. Ham Young-jin, Head of Zigbang Big Data Lab, explained, "These areas have high expectations for redevelopment projects and price adjustments in the first half have made it possible to purchase urgent sale properties." Yang Ji-young said, "With the easing of reconstruction regulations such as safety inspections and the excess profit recapture system, reconstruction speed is expected to improve." Specialist Park Won-gap mentioned large complexes with over 2,000 units, saying, "They meet the needs of the MZ generation, and many have leveraged loans, so during downturns, many cheap properties may appear." Yoon Ji-hae, who mentioned areas like Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, and Guro, where mid-to-low-priced apartments are concentrated, explained, "To find undervalued urgent sale properties, areas with many mid-to-low-priced units where loan regulations have been eased are places where recovery and price negotiations by buyers are possible."

In the metropolitan area, promising locations include Hwaseong (Dongtan), Gwacheon, Bundang, Yongin, and Incheon (Songdo, Gyeyang, etc.), which benefit from GTX development, as well as first-generation new towns. Professor Ko Joon-seok said, "Dongtan and Bundang are areas where jobs are increasing and transportation to Seoul (GTX-A, B) is improving." Doo Sung-kyu, who pointed out Gwacheon, Yongin, and Bundang, explained, "These areas have good access to Seoul, improved transportation and residential environments, and Yongin attracts attention due to the establishment of high-tech industrial complexes."

Experts commonly advise that real demand buyers consider purchasing homes when interest rates are cut. Lab Head Ham Young-jin said, "The timing of interest rate cuts in the second half, when housing prices and transaction volumes recover, is appropriate, and it is also good to watch urgent sales, pre-sales, and auctions." Director Ko Jong-wan explained, "While maintaining a wait-and-see stance until the first half, purchasing a home through new pre-sales, urgent sales, and auctions/public sales is an effective method regardless of market volatility."