Issue Focus

● The housing market in the first half year in 2019 resulted in a slump with the housing sales price and transactions decreased by 0.92% and 30.4%, respectively. The apartments in the other provincial districts had the greatest gap in price depreciation, while Seoul saw the most considerable decrease in transactions. - The Seoul Metropolitan Area saw a decline of 0.85% in the sales prices from January to June, while the provincial metropolitan cities and other provincial districts experienced a decrease of 0.46% and 1.14%, respectively. - The nationwide Jeonse prices and monthly rental prices decreased by 1.40% and 0.64%, respectively. The monthly rental prices have been in a downtrend since 2016. - The housing transactions in the Seoul Metropolitan Area, provincial metropolitan cities, and the other provincial districts all decreased by 43.4% (Seoul: 61.4%), 21.5% and 8.4%, respectively. - While all the indexes of the supply market indicate a downtrend, the publicly licensed Seoul Metropolitan Area has only increased by 16.4%. ● Along with the substantial impact of the pressure variables, the macroeconomic trends and housing supply and demand significantly affect the second half year. - The outlook for the liquidity will increase due to the decrease in the base rate amidst the triple unfavorable conditions—the export, domestic demand, and investment issues. The economic deterioration, however, led to shrinking household expenditures that may eventually affect the upper and lower factors. - It is highly probable that the decrease in the base rate would prevent existing homeowners from decreasing their prices instead of having an influx of new demand. - Some areas have positioned on the pricing trend, but the regulations seem to inhibit the inflow of new supply. - The unsold properties are largely increasing in the other provincial districts, and non-residential (profit-based) properties have the highest risk. ● A reduction of 13% in the market for the publicly licensed and lot-sold apartments in 2019 is expected. The supply remains in the public sector, but the private sector will observe significant reduction. - The permits in 2019 are expected to reduce to 48,000 units, by more than 13% YoY. - The preconstruction-selling apartments in 2019 will decrease to 26,000 units, by approximately 9% YoY. ● The nationwide sales and Jeonse prices in 2019 viewed to reduce by 1.6% and 2.5%, respectively. - The downtrend in the first half year will continue mainly due to the reduced supply, including economic deterioration and financial regulations. The transaction price in the second half year is expected to decrease by 0.5% compared to the last six months, while the other provincial districts will drop to 0.9% continuing the downward trend since the prior half year. - Influenced by the recent construction completions in Pusan and Gyeongnam, which already experiences severe market conditions, the security deposit price will decrease by 1.1% The annual expected decrease is expected at 2.5%, a significantly high value within the last 15 years. - Recent reconstructions and newly constructed(within five years after completion) apartment units in Gangnam, Seoul will lead to demand changes, but various regulations will limit additional housing demands. ● The downtrend since the fourth quarter of 2018 will continue onto the year 2020 and suitable mid- and long-term risk management for the trend is necessary. - The recession in the nationwide housing property market continues, and in particular, market difficulties in the suburbs around the Seoul Metropolitan Area and the other provincial districts will persist for a while and hence require mid- and long-term response. - Policies that are advantageous for the other provincial dicstircts to overcoming the current downward situations must be prepared. - It is concluded that the business strategy based on diversification and minimization of the risks in the business phases will effectively decrease the overall time cost of business operations for the business owners. - Following the strengthened regulatory measures that is sustained by the government in response to the increasing housing sales price of the leading market, such as Gangnam, Seocho and Songpa, there is a need for planning flexibility to the policies that may affect the business operations. ※ Glossary - Seoul Metropolitan Area: 수도권 includes Seoul Special City, Incheon Metropolitan City, and Gyeonggi-do. - provincial metropolitan cities: 지방광역시 includes five metropolitan cities(Busan Metropolitan City, Daegu Metropolitan City, Gwangju Metropolitan City, Daejeon Metropolitan City, and Ulsan Metropolitan City). - other provincial districts: 기타지방 include eight ‘do’s(Gangwon-do, Chungcheongbuk-do, Chungcheongnam-do, Jeollabuk-do, Jeollanam-do, Gyeongsangbuk-do, Gyeongsangnam-do, and Jeju Special Self-governing Province) - Jeonse: 전세, which means a specific type of hosing rental system in Korea. Instead of paying rent regularly to the owner, a large lump sum payment is deposited into the landlord’s bank account for the duration of the contract.