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It’s time to prepare for a question

Posted June. 20, 2023 08:03,   

Updated June. 20, 2023 08:03


“So, when should I buy a house?”

This is the question I get most often when I meet my friends. According to the Korea Real Estate Board, apartment prices in Seoul have risen for four consecutive weeks as of last Monday. Seoul’s Seocho, Gangnam, and Songpa districts have experienced the biggest increases. Additionally, housing prices in the city of Sejong, which had been declining for two years, have been increasing for 13 weeks in a row. This is why people are again asking: “Will housing prices go up again? Should I buy now?'"

Another sign is emerging in the housing subscription market. At the end of last year, applicants had about a 1 in 3.7 chance of winning the top spot in the housing lottery for Dunchon Jugong Apartment (Olympic Park FOREON). However, the chances of winning the top spot in the housing lottery for some Seoul apartment complexes have recently increased to 1 in dozens. For instance, one apartment complex in Pyeongchon, Anyang, had to offer price discounts earlier this year, but now some units are being sold at premium prices. Considering only the Seoul metropolitan area, the fear of unsold units seems to have disappeared.

However, we are also witnessing the opposite trend. The transaction volume for apartments in Seoul has only recovered to 3,000 transactions per month, which is one-third of the past figures when apartment prices were rising, and more than 10,000 units were being traded monthly. Moreover, jeonse prices are declining, and this reversed jeonse trend is likely to worsen after July. The number of unsold units is not decreasing, and there is a significant difference between Seoul and provincial areas. Additionally, it is difficult to dismiss the possibility of a further increase in base rates, which has a huge impact on the market. Therefore, some argue that the current price rebounds do not indicate market recovery but rather result from relaxed regulations and a technical rally due to continued drops.

It is important to note that the driving force behind the demand in the property market consists of individuals who have observed a consistent rise in housing prices, even during periods of economic stagnation lasting over ten years. This differs from the past when people were reluctant to purchase homes despite hearing suggestions to do so and taking out loans. In favorable circumstances, these demand drivers are eager to approach banks for loans, fully prepared to purchase a home. Moreover, we are currently living in an era where information on real estate spreads rapidly and unpredictably. Mortgage regulations have been relaxed, capital gains taxes have been reduced, and property holding taxes have also seen a decrease. Consequently, individuals with available cash are always prepared to invest in a house.

This is why the government should prepare for this situation in terms of policies. The most effective approach to prepare for such a scenario is by consistently providing quality and affordable housing in the market. It is encouraging to see that some new public housing supplies are emerging in Seoul, such as Capital Defense Command Lot in Dongjak District, Godeok, and Gangil. However, it is worth noting that these projects were announced several years ago. The previous administration unveiled several new sites, but no progress has been made thus far. The relaxation of the Reconstruction Excess Profit Recapture System, a crucial regulation that has impeded Seoul's renovation projects, is still pending approval by the National Assembly.

So the question, “When should I buy a house?” implies the possibility that those who previously gave up on buying a house can always become individuals who purchase houses by fully taking out loans. I hope the government recognizes this significance.