"It Is Hard Even to Look at Real Estate"...Growing Conviction in Government Circles That "This Time Is Different"[Gwan-ga in]

Confident about "curbing the rate of increase" around the local elections
The government's goal is a "gentle downward trend"
Confidence backed by the KOSPI 6000
On the financial front: "We feel self-conscious about real estate loans"

Within the government ministries in charge of real estate policy, a sense that "this time is different" is spreading. As President Lee Jaemyung keeps stressing housing price stability and is daily pressuring multi-homeowners to put their properties on the market, officials are gaining confidence that they can go beyond merely curbing the rate of increase and actually establish a "manageable path of decline." Voices from the banking sector also say that the atmosphere surrounding housing-related credit has rapidly turned conservative on the ground.

'Urgent sale' posted at a real estate agency. Yonhap News

On the 26th, a senior government official said, "The government's goal is not just to break the upward pace, but to shift the overall trend toward a gentle decline," adding, "We cannot state it with complete certainty, but at a minimum we believe it will be possible to curb the rate of increase around this upcoming local election." Another government official likewise said, "Now that favorable economic conditions have formed that can change the trajectory of the real estate market, we will strongly steer the market toward a soft landing even after the election."

Inside the government, there is a view that the macroeconomic environment has become favorable for pushing ahead with policy. The recent stock market rally has created positive sentiment across asset markets in general, and there is a perception that even if real estate slows, the growth rate (gross domestic product (GDP)) may not be severely shaken because exports, centered on semiconductors, are providing support. There is also an internal assessment that the construction cycle is not as bad as feared. One government official hinted, "Non-residential construction indicators that we monitor internally are not at a level that warrants such serious concern." In addition, the high interest rate environment is working as a policy-friendly condition for restraining demand.

Banks that actually extend loans are feeling this government stance very strongly. As signals to curb real estate lending continue, mortgage screening is inevitably becoming more conservative, and the burden associated with the review process has also grown. An employee at a financial institution said, "It is very clear that the regulators in charge are pushing the policy drive extremely hard," adding, "Right now everything is being channeled into productive finance, and the mood around real estate is such that it is hard even to look at it." The employee went on, "It has reached the point where granting real estate loans makes you feel self-conscious."

Data also show a trend in which the government's hard-line stance is weighing down expectations. According to the February Consumer Survey released by the Bank of Korea on the 24th, the housing price outlook index stood at 108 in February, down 16 points from the previous month (124). This is the largest drop in 3 years and 7 months since July 2022. A housing price outlook index of 100 or higher means that more respondents expect housing prices to rise over the next year. The average amount of new mortgage loans also decreased to 212.86 million won in the fourth quarter of last year, down 14.21 million won from the third quarter.

However, some within the government are sounding a note of caution. Another government official pointed out, "Because the uptrend lasted for such a long time, we need to watch a bit longer to see whether a structural downturn is really taking hold."