Housing market improving: JP Morgan

Korea's housing market has finally started to bounce back with signs of recovery in the secondary market, JP Morgan said Thursday.

"Since 2011, we have seen a gradual pick up of housing indicators -- provincial cities in secondary markets," said Jinmook Kim, an analyst at JP Morgan.

Construction companies cleared their housing inventories last year by cutting prices, which negatively impacted their margins, JP Morgan explained.

The investment bank said the inventory de-stocking cycle looks to have peaked out and forecast a gradual recovery of housing prices.

"These have largely been driven by the low housing supply, given that the housing market has been depressed for the past three years," Kim said.

In 2011, housing completions fell 27 percent on-year, the largest decline since 2001.

"We forecast the trend will continue in 2012 with another 22 percent decline. Meanwhile, demand was quite supportive, particularly in provincial cities," the analyst said.

According the bank's estimates, transaction volume increased 15 percent on-year last year, while home purchase prices and rental prices rose 7 percent and 12 percent, respectively.

Primary housing markets will start to improve, lagging behind the secondary markets by six to 12 months, as construction companies will justify project starts on improving indicators, JP Morgan said.

It added, however, the upcoming recovery in the housing market will not match the peak level recorded from 2004 to 2007 in South Korea.

Due to slumping property markets and a rise in home rental prices, South Korea has been seeing sluggish transactions in the housing markets for the past few years. (Yonhap)