Land minister unable to say house prices rising but experts say ‘He should accept reality’

Wangsuk New Town A1 and A2 in Namyangju, Gyeonggi Province, which was scheduled for the main subscription in November this year, was postponed for more than eight months.

The recent rise in housing prices in Seoul and the metropolitan area has sparked debate over whether it is a trend or not. Minister of Land, Infrastructure, and Transport Park Sang-woo has said that it was not a trend rise, but the opposite opinion is dominant, saying, "If we don't acknowledge reality, the market will become more unstable." In the absence of a strong signal from the government to regulate real estate, they argue that if interest rates are cut in the second half of the year, investment and speculative demand could drive prices even higher.

In particular, there are criticisms that the government's move to ease the comprehensive real estate holding tax and the delay in implementing the second phase of the Stress DSR (total debt service coverage ratio) regulation stimulated demand sentiment.

When Kyunghyang Shinmun spoke with nine experts in the real estate industry on the phone on July 14, seven said they disagreed with Park's outlook that "the trend is not upward. Overall, many said the upward trend will continue for the time being. One did not state his or her position, while the other agreed with Park.

At a press conference in Sejong on the 11th, Park said, "I'm convinced that the trend of housing prices is not upward," citing high interest rates and construction costs, a weak demand base, and expanding supply, including the third New Town scheduled to begin construction later this year.

However, Park Hap-soo, an adjunct professor at Konkuk University's Graduate School of Real Estate, sees the current housing market as "in the early stages of an upswing.” "Gangnam, Seoul, was the first to rise, followed by Mapo, Yongsan, and Seongdong, and (the upward trend) will expand to Dongdaemun, Yeongdeungpo, No-Do-Gang (Nowon, Dobong, and Gangbuk), and then Geum-Gwan-Gu (Geumcheon, Gwanak, and Guro)," he said. "With jeonse (lump-sum rental) prices continuing to rise, an expected supply shortage, and interest rate cuts, house prices will trend upward," he said.

According to the Korea Real Estate Board's weekly apartment price trend, Seoul apartment sales prices increased by 0.24 percent in the second week of July (as of July 8) from the previous week. The increase was larger than the previous week (0.20 percent) and the largest in five years and 10 months since the third week of September 2018 (0.26 percent). Nationally, prices rose 0.03 percent. The Seoul metropolitan area increased by 0.12 percent from the previous week, while the other regions decreased by 0.03 percent, but the decrease was smaller than the previous week (0.04 percent). Jeonse prices rose for the 60th consecutive week, with Seoul up 0.02 percent and the metropolitan area up 0.13 percent. The other regions fell 0.02 percent, unchanged from the previous week.

Minister Park said that high interest rates and construction costs are making it difficult for home prices to rise further, but there are those who disagree.

"The interest rate hasn't been decided, and if the sale price of new apartments is soaring due to rising construction costs, more people will look for existing homes, so the sales price is bound to rise," said Yoon Soo-min, a real estate expert at NH Bank. "The minister's perception of reality is complacent," said a real estate industry official who requested anonymity. "If the minister does not recognize reality as it is, the market will become more chaotic," said an official from the Korea Housing Association.

Park and the experts were in agreement that the recent rise in housing prices is driven by actual buyers, not investors. But even among experts, there were differences in interpretation.

"Transactions are increasing and prices are rising amid fears that the same boom market in 2020-2021 could return," said Kim In-man, head of the Korea Real Estate Economic Research Institute. "At such a time, the government should have signaled that it can regulate strongly, but instead, the abolition of the comprehensive real estate holding tax, the abolition of pre-subscription for public sales, and the postponement of the implementation of the second phase of DSR regulations have added fuel to concerns over price hikes."

On the other hand, Kim Hak-ryul, head of Smart Tube's real estate research center, said there is not much investment demand. "In 2020-2021, real estate in all regions was rising, but now only major areas in Seoul are rising, and the other regions are still struggling," he said. "It will be difficult to sustain the rise as there are no investment sales, unlike three to four years ago." He predicts that mortgage loans will not increase further once the financial authorities' second phase of DSR regulations takes effect in September.

Judgments were also mixed on whether the third New Town will solve the housing supply shortage, with most agreeing that supply is insufficient, but some disagreeing.

"Seoul needs to supply about 50,000 units a year to meet demand, but less than 4,000 households are expected to move in in 2026 (due to delays in building permits and construction)," said Yoon Ji-hae, head of research at Real Estate R114. "The third New Town may solve some of the demand in the metropolitan area, but the move-in won’t begin until 2027,” she added.

"When talking about housing supply, for the government, it is based on building permits, but completion and move-ins are more important in the market," said Mr. B, a real estate industry official. "As rental prices in the metropolitan region, including Seoul, are rising, there is not enough supply to meet demand next year and in 2026, before the supply of the third New Town begins in earnest."

On the other hand, Lee Chang-moo, a professor of urban engineering at Hanyang University, said, "The growth of single-person households in the Seoul metropolitan area has recently slowed down, so the demand for housing, which had exploded, seems to have stabilized to some extent."

※This article has undergone review by a professional translator after being translated by an AI translation tool.