"Is It Time to Buy a House Now?"... Trading Volume Drops but Buying Sentiment Stretches Out [Why&Next]

[Real Estate A to Z]
Housing Sentiment Index Turns Upward This Year
Supply-Demand Trends Decline for Five Consecutive Months
Nationwide Apartment Transactions Also Decreasing
Sentiment Index Reflects Market Changes in Advance

Housing market sentiment has shown signs of recovery this year. More people are starting to consider buying homes, viewing properties, or engaging in transactions. Experts regard the growing optimism about market improvement as "a good sign that transactions are reviving." Moreover, they assess that if external factors such as policy changes act as triggers in this situation, a market rebound in the second half of this year can be anticipated.

"Should I buy a house?"... Improvement in buying sentiment

According to KB Real Estate on the 5th, all three major indicators reflecting real estate market sentiment have turned upward. Among them, the Buyer Dominance Index showed an upward trend both in Seoul and nationwide. This marks the first recovery since August last year. This index indicates that if the value is below 100, there are more sellers than buyers in the housing market. Although the current market can still be considered supply-dominant, it signifies that market sentiment is gradually changing.

The nationwide Buyer Dominance Index recorded 26.2 last month, rising 0.5 points from the previous month. After peaking at 37.6 in August last year and declining since, it shifted to an upward trend this month for the first time in six months. Seoul recorded 44.2, jumping 8.8 points from the previous month.

The Price Expectation Index stood at 90.4, increasing by 4.9 points from the previous month. This is the first upward shift in five months since September last year. In Seoul, it rose from 85.8 to 97.3 within a month. When the Price Expectation Index exceeds 100, it means many people expect housing prices to rise within the next 2 to 3 months.

The Transaction Activity Index, which reflects the atmosphere of real estate transactions, has risen for two consecutive months since January. Last month, the nationwide Transaction Activity Index was 10.8, up 3.9 points from the previous month. During the same period, Seoul's index reached 16.1, increasing by 8.2 points in one month. A higher Transaction Activity Index indicates more active housing transactions, while a lower value suggests a sluggish market.

Declining transaction volume and continued seller dominance

Looking only at the three major buying sentiment indicators, the market seems to be improving. However, actual transaction data suggests this optimism is more like a mirage. According to the Ministry of Land, Infrastructure and Transport's housing statistics, apartment transactions nationwide in January totaled 29,784 units, down 13.3% from the previous month. In Seoul, apartment transactions recorded 3,233 units last month, an 11.6% decrease compared to 3,656 units in the previous month.

Apartment supply-demand trends still indicate a supply-dominant market. The Korea Real Estate Board's January nationwide Apartment Sales Supply-Demand Index was 92.0, marking a decline for five consecutive months. Seoul's index stood at 96.4, down 1.3 points from the previous month. This index quantifies the balance between apartment demand and supply. Values below the baseline (100) indicate weaker demand for purchasing homes.

"Sentiment improves first"... Time lag with transaction volume changes

Yonhap News

Experts analyze this discrepancy as a result of buying sentiment moving ahead of the market. Expectations for regulatory easing, such as interest rate cuts and lifting of land transaction permission zones, were reflected in the indices earlier.

Song Seung-hyun, CEO of City and Economy, explained, "Buying sentiment appears to have rebounded due to policy changes like regulatory easing and interest rate cuts. If the desire to buy translates into transactions, supply-demand trends and transaction volumes can gradually change." Kwon Young-sun, team leader at Shinhan Bank's Real Estate Investment Advisory Center, said, "There has been no noticeable increase in transaction volume or other indicators. The improvement in buying sentiment under these circumstances can be seen as a pre-reflection of expectations that the market will improve due to interest rate cuts and supply shortages."

There is also an opinion that the government's housing transaction volume statistics, which are compiled based on the reporting date, cause a time lag with the current market flow. An industry insider explained, "Transactions are counted in the volume statistics about two months after the final payment is made, when the actual transaction is reported. Therefore, transaction volume has room to rebound in the future."

Rebound expected with external factors... Seoul's buying sentiment amplified by lifting of land transaction permission zones

Some predict that with buying sentiment already improving, additional positive factors could increase market volatility in the second half of this year.

Kim Je-gyeong, director of Toomi Real Estate Consulting, said, "This shows that consumers are waiting to buy as soon as external conditions align. The consumer sentiment existed but was waiting for the market situation to change." Kim Hyo-seon, senior real estate specialist at NH Nonghyup Bank, diagnosed, "Currently, the market atmosphere is that waiting buyers are observing prices. Demand could surge even with a small issue."

For example, the price increases and transaction volume growth following Seoul's lifting of land transaction permission zones in Jamsil, Samsung, Daechi, and Cheongdam areas on the 12th of last month reflect this buying sentiment well, according to experts.

According to apartment price trends published weekly by the Korea Real Estate Board, Songpa-gu in Seoul, where the permission zones were concentrated, saw prices rise 0.36% in the week following the lifting (February 17?23), and then increased by 0.58% the following week, amplifying the price rise. The southeastern region, including Gangnam, Seocho, Songpa, and Gangdong districts, jumped 0.36%. Gangnam's housing prices reversed the downward trend that had lasted eight weeks, even lifting the broader Seoul metropolitan area's prices, which rose 0.01% this week. However, prices in Gyeonggi Province fell 0.04%, and Incheon dropped 0.03%, continuing the downward trend outside Seoul.

Kim Je-gyeong explained, "Recently, in areas like Jamsil, the lifting of land transaction permission zones has acted as a trigger, fueling consumer sentiment and overheating the market." Yoon Soo-min, real estate specialist at NH Nonghyup Bank, analyzed, "With interest rate cuts and supply shortages creating a price increase atmosphere, the lifting of land transaction permission zones quickly and strongly triggered the sentiment for rising housing prices."

They also expect that if buying sentiment translates into actual transactions, its ripple effect could spread to other regions. Yoon Soo-min predicted, "With expectations for rising housing prices in the Gangnam 3 districts growing due to the lifting of land transaction permission zones, this sentiment could gradually spread to other areas." Kim Je-gyeong forecasted, "Prices are also rising in Mapo-gu and Seongdong-gu, so the easing atmosphere is expected to gradually spread throughout Seoul."

Meanwhile, the Seoul Metropolitan Government issued a statement on the 28th of last month regarding market changes following the lifting of land transaction permission zones, denying the overheating claims by stating, "Although transaction volumes increased in the lifted areas, there was no sign of price surges."