[Post-Impeachment] "Temporary Wait-and-See, No Impact on Overall Trend"... Experts' Views on the Direction of House Prices

House Prices Fell During Former President Park Geun-hye's Impeachment
House Prices Actually Rose During Former President Roh Moo-hyun's Term

"Market Caution Due to Loan Regulations Rather Than Impeachment"
"Possibility of Jeonse Crisis Due to Delays in Government Supply Measures"

View of apartment buildings in downtown Seoul from Inwangsan Mountain, Seoul. Yonhap News

With the impeachment motion against President Yoon Suk-yeol passing through the National Assembly, the real estate market is expected to enter a wait-and-see phase where neither buying nor selling houses will occur for the time being. During the impeachment of former President Park Geun-hye eight years ago, house prices showed a short-term decline. Experts predict that the wait-and-see trend will continue as political issues overlap with already weakened buying sentiment due to loan regulations. However, opinions differ on the ripple effects the impeachment political situation will have on the real estate market. Some view that government policies and the paralysis of the National Assembly could plunge the market into confusion, while others expect the impact to be limited.

A Brief Decline in 2016, Will It Repeat This Time?

According to time series data from the Korea Real Estate Board on the 15th, house prices briefly declined during the impeachment political situation of former President Park Geun-hye. In December, when the impeachment motion was passed in the National Assembly, the nationwide apartment transaction prices fell by 0.33% compared to the previous month. Seoul saw a 0.6% drop. Until October, prices had risen by 0.69% and 1.32% respectively, but after former President Park’s public address in November, the impeachment political situation began in earnest, causing prices to dip. This index briefly declined until January 2017, then recovered, and by May, when the presidential election was held, it rose by up to 2.03% in Seoul.

On the other hand, during March to May 2004, when the impeachment motion against former President Roh Moo-hyun was passed in the National Assembly but dismissed by the Constitutional Court, housing prices nationwide rose by 0.12%, and in Seoul by 0.39%. Kim Gyu-jung, a real estate specialist at Korea Investment & Securities, said, "It is difficult to see from statistics alone that the impeachment political situation directly and closely affected real estate transactions or prices," adding, "It is more accurate to say that loan and interest rate policy trends or related regulations, which directly affect housing transactions, still have a greater impact than political changes."

Yoon Ji-hae, senior researcher at Real Estate R114, also said, "The peak of political uncertainty shaking the country is when the impeachment is debated, and this seems to have been partially resolved with the passage of the impeachment motion," adding, "Although variables such as the Constitutional Court ruling and early presidential election remain, the process will end within six months, making it difficult to find a connection with the real estate market. Political issues are basically neutral factors in the real estate market."

Experts: "Wait-and-See Trend in Transactions to Continue for the Time Being"

Experts believe that buying sentiment, already weakened by loan regulations, will be hard to improve even after the impeachment motion passes. Ko Jun-seok, professor at Yonsei University Graduate School of Business, said, "The real estate market has entered the winter season, which is considered the off-season, and loan regulations that directly affect transactions are expected to remain unchanged even after the impeachment motion passes," adding, "Given these conditions conducive to transaction stagnation, the decrease in buying demand is inevitable. The wait-and-see trend will continue for the time being."

Senior researcher Yoon Ji-hae said, "From the perspective of actual buyers, the important point is the current loan situation," explaining, "It is not that purchases are postponed due to political instability, but rather that loans are not being approved now, so people cannot buy." On the other hand, Kim Gyu-jung emphasized the negative impact of the impeachment political situation on buying sentiment, saying, "Because buyers find it difficult to predict market conditions, the phenomenon of reduced transactions and intensified wait-and-see behavior can be the first to be observed in the field."

Opinions differ on whether the decrease in housing transactions will lead to a decline in house prices. Professor Ko said, "If both buyers and sellers maintain a wait-and-see stance and do nothing, it means that asking prices will also remain at current levels," predicting, "Rather than prices falling, they will likely remain flat for the time being." He foresaw that depending on next year’s political situation and related real estate policy changes, house prices could either expand or contract further.

Park Chan-dae, floor leader of the Democratic Party of Korea, is presenting the proposal for the impeachment of the President (Yoon Seok-yeol) at the 4th plenary session of the 419th National Assembly (extraordinary session) held at the National Assembly on the 14th. Photo by Kim Hyun-min

There is also a view that house prices in the outskirts of Seoul or in provincial areas may decline. Kim said, "If transactions decrease, price adjustments may begin from the outskirts, especially in less preferred areas." Kim Seong-hwan, associate researcher at the Construction Industry Research Institute, explained, "Loan regulations are being implemented, but incentives such as housing supply are likely to be delayed, raising concerns about market stagnation," adding, "Non-metropolitan areas are particularly likely to suffer greater damage."

"If Government Supply Policies Are Delayed, Rental Market Will Be Hit"

With the impeachment motion passing, the Yoon Suk-yeol administration’s various housing supply policies are likely to slow down. Experts expressed concern that if housing supply policies are stalled or delayed amid a situation where apartment move-in volumes decrease over the next three years starting next year, the rental market could be adversely affected.

Doosung Kyu, head of the Mokmin Economy Research Institute, pointed out, "The government has a heavy workload on the supply side, but political issues have arisen before proper preparations were made," warning, "If there is no absolute volume of jeonse (long-term lease) supply from new apartment complexes, a jeonse shortage could suddenly occur." He added, "In Seoul and adjacent metropolitan areas, jeonse prices have already been rising for over a year, and the problem is already emerging," noting, "If jeonse prices rise, unnecessary rapid increases in house prices could also occur."

Associate researcher Kim Seong-hwan also predicted, "If the number of people wanting to buy houses decreases, jeonse demand may increase, and with a decrease in new move-in volumes, there is room for jeonse prices to rise." However, he forecasted, "Since the jeonse price ratio has fallen significantly, even if jeonse prices rise slightly, it will not be enough to push up sale prices." Kim Gyu-jung said, "There are mixed factors such as loan regulations and political variables that suppress transactions, along with supply shortages that drive price increases, so it is necessary to closely monitor the situation."

Contrary to concerns, some believe it is unlikely that the current administration’s housing supply policies will be reconsidered from scratch. Senior researcher Yoon Ji-hae said, "The 3rd new town projects were promoted by the Moon Jae-in administration, and the 1st new towns were expanded with the cooperation of the opposition party through the Special Act on the Maintenance and Improvement of Old Planned Cities," adding, "There is already bipartisan consensus on supply policies, so it is unlikely that policies will be delayed or derailed."