By Jane Han
Staff Reporter
Some local property pundits say the bubble in the Korean real estate market is headed for a bigger bust next year, but a foreign property brokerage group shed a rare positive light Thursday, saying that a severe downturn is unlikely since there was no bubble in the first place.
``Korea has not experienced a price bubble overall if we consider various characteristics that constitutes a bubble,'' Mark Vink, senior research analyst at Savills Korea, an affiliate of a global property consultancy, told The Korea Times.
He explained that house prices against changes in income and equity value don't spell out ``bubble,'' which is contrary to Korean experts' take so far.
Many local real estate consultancies and commentators have claimed that the economic slump and credit crunch would combine to trigger the bursting of a domestic property bubble, particularly in red-hot districts in southern Seoul that have led speculation since 2005.
So far this year, residential properties have shed 30 to 50 percent with expectations that another slump is ahead next year although trading is quite slow.
A new Savills report, however, states that there is much less pressure pushing down Korean house prices compared to countries such as the United States, Hong Kong and Australia.
``Price increases in recent years here have been much lower in Korea than in other countries around the world where housing markets are now undergoing severe corrections,'' Vink said, adding that home values have gained only 50 percent here, while the U.S. market doubled and U.K. tripled over the past 10 years.
He said prices will move forward because Korea does not have sub-prime mortgage problems, with mortgage loan-to-values among the lowest in the OCED. Persistent housing shortages in key regions and the government's housing stimulus packages, including tax cuts and lowered interest rates, were other factors the report highlighted.
He said there is no doubt that deteriorating economic conditions will lead to further softening in the housing market, but suggestions of a ``collapse'' are exaggerated. Savills forecasts that values will dip by about 5 percent next year.
A recent survey of 2,000 local realtors nationwide showed that 70 percent were pessimistic about next year's real estate market, while 44 percent said the buying mood will return only after 2010.
Savills predicts the second half of next year as a turning point as prices will bottom out and transactions will pick up again.