[Home Tech] How to Keep the Housing Market Stable During a Regime Change Period

Housing Market Likely to Remain Cautious
Market Stability Possible Only by Viewing Real Estate Through Macroeconomic Stability and Industrial Ecosystem Transformation

Editor's NoteMore than 70% of the assets of Korean citizens are tied up in real estate. A home is our most important asset and the closest, coziest place for us. While living tied to our homes, we provide the necessary information for buying and selling houses. Asia Economy publishes [JipTech] every three weeks with Kim Hyoseon, Senior Real Estate Specialist at NH Nonghyup Bank, to fill you in on the essential knowledge.

The Trump administration's strengthening of protectionism in the United States delivered a strong shock to the global financial markets. Stock markets worldwide plunged, the KOSPI index fell by more than 5%, and the won-dollar exchange rate surged. Goldman Sachs lowered its U.S. growth forecast for this year from 2.4% to 1.7%. The Korean economy, which is highly dependent on exports, inevitably faces direct impacts. The burden felt by households will increase due to rising import prices following foreign exchange market instability, and the domestic construction industry is expected to be negatively affected by rising raw material costs. With the political vacuum prolonging, asset market participants are facing an even more anxious phase.

During the regime change period, uncertainty in the housing market is growing. Amid a political vacuum of about two months from the president's impeachment to the June presidential election this year, market expectations and concerns about policy directions are intersecting. In the presidential election phase, promises from political parties and real estate-related policies pour out, and in some areas, prices are soaring due to expectations of development benefits. For example, Sejong City has reportedly seen prices jump by several hundred million won following discussions on revising laws related to relocating the administrative capital. Active market participants are learning about election pledges and past party policy trends and moving quickly. The time before the presidential election can be a period when market confusion is maximized.

Yonhap News

This year, the housing market is likely to remain cautious due to the overall economic uncertainty. There may be a simultaneous occurrence of inventory accumulation in peripheral areas and rapid price increases in some regions. Especially, areas with solid brand value such as the three Gangnam districts, large premium apartment complexes, and regions with clear development prospects will maintain their status as safe assets amid market turmoil.

The government is expected to put more effort into "housing stability for the lower and middle classes." However, policy directions will diverge depending on whether the means to achieve this lie in supply expansion or demand control. Supply-centered policies are pursued by granting tax benefits to the construction industry to expand housing supply or by easing supply regulations within urban areas. On the other hand, demand control policies focus on expanding rental housing supply and strengthening taxation on multiple homeowners to suppress demand. Although the goal is the same, the outcomes can be entirely different. If supply expansion is focused on during a period when the profitability of supply projects is low, the effect may be limited. Conversely, stimulating demand in a liquidity-rich environment can concentrate assets in specific areas and deepen regional disparities.

Considering these market trends, the role of local governments becomes even more important. They should focus on enhancing regional industrial competitiveness and brand value rather than short-term market stimulation or expanding household debt. It is time for innovation in the industrial structure itself, not unlimited support for the construction industry. If easy solutions are repeatedly pursued, structural problems such as market distortion, increased household debt, and even regional extinction may worsen together.

The government and local governments should view the real estate market based on two pillars: macroeconomic stability and industrial ecosystem transformation. Industrial complexes in Busan, Ulsan, Gyeongnam, and other areas still centered on secondary industries should be reorganized to align with the Fourth Industrial Revolution, and cities with strong regional brands and self-sufficient functions should be fostered. The recovery of the real estate market must naturally occur within the economic structural transformation and regional competitiveness enhancement. In such a confusing period as now, market participants need insight to read changes in regional value and policy directions rather than just short-term price trends. To achieve long-term asset stability, accurate judgment is required rather than quick decisions.

Kim Hyoseon, Senior Real Estate Specialist, NH Nonghyup Bank