Issue Focus

A highly contagious COVID-19 has had significant impact on real estate market. According to indices, the research found that the damage is more evident in non-housing sector, particularly which accompanies contact activities such as retail and entertainment sectors. Although the retail sector have shrank gradually before the COVID-19 due to the rising e-commerce, this report argues that the trend has been sharply accelerated due to the COVID-19. In the case of housing sector, indices shows that the virus affected housing prices in areas such as Daegu where were hit most hardly. COVID-19 also affected the housing prices of some other areas where the price increased rapidly over the past few years. Global real estate market, as well, also shows that COVID-19’s impact is particularly evident in the commercial sector. It is expected that the impact of COVID-19 on real economy is becoming more significant for prolonged period. This in turn is likely to influence on the real estate market strongly. According to the quantitative ripple effect analysis of the COVID-19 on real estate market, the authors argue that the amount of decrease in private consumption expenditure may reach to 3.2 trillion(KRW). The analysis shows that the decrease in the production inducement effect could reach up to 4.6 trillion(KRW), the added value up to 12.2 trillion(KRW) and employment up to 100 thousands people. In this report, the authors suggest step-by-step policy responses, which keep pace with macro economic and real estate market downfall. Firstly, in order to tackle with the current acute difficulties of retail owners and unemployed people, the authors suggest demand-side measures such as releasing LTV limits as long as the additional loan would be used for living or operating businesses. Supply-side support is also necessary to support construction and financial companies that are experiencing unexpected financing difficulties for example in refunding short-term bonds in PF projects. If the economic downfall becomes deeper and more evident, more proactive policy measures are required in both supply and demand sides. This report also argues that in order to boosting domestic demand, government should take advantage of the current economic crisis by releasing ‘unreasonable regulations’ that have been imposed to cooling down real estate market.