Issue Focus

● The housing business was relatively stable in the first half of 2018 with a 0.5% increase in the sale price and a 3.5% increase in transactions. However, the decoupling of the capital area and the provinces appeared to intensify. For example, the sale price in the capital area increased by 1.4% but only 0.09% in the five metropolitan cities(Busan, Daegu, Daejeon, Gwangju, and Ulsan) other than the Seoul Metropolitan Area and even decreased by 0.61% in other provinces. ● The forecast for the second half of 2018 is primarily affected by the interest rate, increase in construction completion, and policy, with several downward pressure of the economy. First, in broad perspective, overall demand is predicted to shrink due to the depression of employment conditions and the rise in the interest rate. Regionally, while demand is maintained with Seoul at its core, the market burden is rising due to the increase of supply in the outskirts. Furthermore, the provinces are even showing decreased demand due to the deterioration of the regional economy. Demand for other areas such as border areas and products such as some profitable properties and detached houses is on the rise, but the market share is negligible. ● In 2018 2H, the reduced demand is expected to cause license and pre-sale market to decrease over 10% Year-on-Year with especially more significant decreases in the regional provinces. Moreover, the Jeonse(long-term housing rental contract only in Korea) prices and the sales prices are expected to decrease by 1.3% and 0.5%, respectively, recording the biggest decrease margin in 14 years. ● As the housing business is expected to be in a downhill situation in the second half of 2018, appropriate political effort and business strategy is necessary. Policies should aim to reduce market fluctuation. Cost management is urgent for construction companies in anticipation of falling returns due to government policies that increased cost burden and controlled the pre-sale housing prices. There is a high possibility that this state of depression will continue onto 2019, requiring a long-term solution is necessary.