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Consumer sentiment falls to record low following state measures
By Park Hyong-ki
The local housing market is likely on course for a further downturn as an index measuring consumer sentiment on this has hit a record low.
The falling confidence comes as sales of apartments have nearly frozen following stronger real estate measures.
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This is down from 91 in January, and the lowest since the central bank began compiling data in January 2013.
This is not only far lower than the threshold of 100 points, but also marks a decline for the fifth consecutive month.
A reading below 100 indicates that those with a negative view on the market's future outnumber those with a positive outlook.
Previously, the central bank had a different index measuring sentiment on apartments and small retail stores within residential complexes. In 2009, this index hit a record low of 84.
Analysts say the residential housing market is expected to face a slowdown, given the government's strong commitment to stabilize the "abnormal prices" of apartments.
"The market is likely to continue slowing down moderately as the government has been very committed to stabilize it by supplying new apartments particularly in the Seoul metropolitan areas," said Lee Han-kook, representative director of Jones Lang LaSalle Korea.
Also, the prices of apartments could face volatility if the government comes to a point where it cannot back the housing supply, he added.
If that happens, people with money will again start to invest in residential properties, and this will increase prices again as seen two to three years ago.
The inequality between the Seoul metropolitan and provincial areas will deepen this year, given the still higher demand in the former than in the latter.
Also, the economic slowdown this year will weigh on the housing market.
"The prices of apartments in Seoul's Gangnam district will serve as a key barometer we need to watch going forward," Lee added.
In September 2018, the finance ministry introduced comprehensive real estate measures aimed at curbing household borrowing, apartment prices and speculation especially in Seoul.
They included imposing much heavier taxes on owners of multiple, high-valued homes.
The measure has restricted borrowings by homeowners to the point where they are no longer allowed to take out additional mortgages to purchase homes.
The government will raise the comprehensive real estate tax rate to 3.2 percent for those who own more than two homes in Seoul and Sejong, an administrative city.
Also, those with a single expensive home will have to pay an average tax rate of 2.7 percent ― the range has been increased to between 2.5 percent and 3 percent.
Overall consumer sentiment has improved, reaching 99.5 for February, up 2 points from the month before despite falling exports.
This comes amid expectations for expanded economic ties between the two Koreas, the central bank stated.
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