NH Investment & Securities "Real Estate Market to Show Moderate Strength Next Year... Acceleration of Differentiation and Localization"

NH Investment & Securities forecasted that the real estate market will show a firm upward trend next year. They anticipated an acceleration in regional differentiation.

On the 19th, NH Investment & Securities announced the publication of the report titled '2025 Real Estate Market Outlook_Taking a Break, Then Foreseeing a New Housing Shortage.' This report reviews the 2024 real estate market and presents the 2025 real estate market outlook based on demand and supply as well as economic variables.

NH Investment & Securities assessed that the 2024 real estate market was characterized by a solid real demand market with increased transaction volume and rising prices due to the recovery of the jeonse price ratio and rising pre-sale prices, along with record-high transactions in prime areas and redevelopment projects. Although the base interest rate was lowered in the fourth quarter, the market entered a stagnation phase due to loan regulations and elevated seller asking prices, and it is expected that the first quarter of 2025 will be a turning point to determine whether this is a temporary phenomenon or a trend.

The real estate market next year is expected to show a firm upward trend, with acceleration in differentiation and localization where both rising and falling areas coexist. Factors driving the rise, such as increases in jeonse and monthly rent prices, expectations of interest rate cuts, and supply shortages in preferred areas, are expected to outweigh the downward factors, sustaining localized upward momentum.

Key variables identified include additional loan-related regulations and the direction of the base interest rate. It was reported that the apartment sales market sentiment improved in 2024 due to rising jeonse prices, a heated pre-sale market, and expectations for redevelopment projects. The jeonse and monthly rent market also continued to rise; for example, the average jeonse price in Seoul surpassed its previous peak from March 2024 and steadily increased, while nationwide, as of September 2024, it recovered to about 98% of the peak level recorded in November 2021.

The report analyzed that sales prices and jeonse prices have maintained a synchronized upward trend. Although pre-sale volumes increased compared to last year, move-in volumes decreased. The cumulative nationwide permits as of September were about 191,000 units, which is less than the permit volumes during the same period from 2021 to 2023. While the number of housing starts increased compared to the previous year, it was only 56-74% of the levels seen in 2021-2022, indicating a potential future supply shortage. On the demand side, income disparities among households have widened, increasing imbalance, while the annual per capita Gross National Income (GNI) has steadily risen.

Although transaction volumes have decreased recently due to loan regulations, the demand reduction effect caused by these regulations is unlikely to last long. Jeong Bo-hyun, Senior Researcher of Real Estate at NH Investment & Securities Tax Center (NH WM Masters Specialist), stated, "In the short term, economic growth forecasts are declining, global economic uncertainties are increasing, and financial conditions such as external factors and interest rate directions will significantly influence the domestic real estate market. Subsequently, as macroeconomic factors have less impact on market variables, supply and demand conditions in spatial environments (supply shortages in preferred areas) are expected to have a greater influence on price determination." Jeong Yu-na, Lead Researcher of Real Estate at NH Investment & Securities, explained, "Although short-term demand contraction is expected due to the introduction of the third stage of the Debt Service Ratio (DSR) stress test and household debt management policies, the possibility of a price decline is low due to the recovery of loan limits and the effects of policy mortgages. However, careful monitoring is necessary for the increase in unsold units in provincial areas and listings in the metropolitan area."