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| A man looks at notice boards for home sales and rentals posted by a realtor in Songpa-gu, southern Seoul, Sunday. Experts say the country's property market is undergoing a solid recovery, citing an increasing number of transactions and houses purchased at auctions. / Yonhap |
Rise of transactions, fall in unsold homes point to upturn
By Yi Whan-woo
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| Cho Sung-gon, head of Citibank Korea's consumer sales division |
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| Lim Hyun-mook, head of real estate market team at Shinhan Bank |
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| Park Ki-jeong, research fellow at Korea Appraisal Board |
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| Ha Yu-jung, research fellow at GG Auction |
They said that government measures to ease regulations will help provide a boost for a full recovery of the property market that has remained in the doldrums for the past few years.
"The overall circumstances are favorable for the property market," said Cho Sung-gon, head of Citibank Korea's consumer sales division.
According to Cho, the three key indices for the real estate market, namely the numbers of home transactions, unsold homes and homes purchased at auctions, point to an upturn.
The latest data released by the Ministry of Land, Infrastructure and Transport (MLIT) showed that the number of home transactions across the country hit a five-year high of 58,846 in February.
The number of unsold homes in the country fell from 61,091 to 58,576 during the same period.
Meanwhile, the successful bid rate at auctions reached 83.9 percent in and around Seoul, including Gyeonggi Province, according to GG Auction, a brokerage specializing in auctions. This figure is the highest since November 2009 when the global economic crisis swept the country, according to the brokerage.
"The improvement in those indices coupled with government measures that almost rooted out all real estate market regulations will boost the industry," Cho said.
Lim Hyun-mook, head of the real estate team at Shinhan Bank, echoed the view.
"Our own study indicated that until last year, housing prices have been falling to as low as the prices during the global economic crisis in 2008. They have been gradually increasing since then."
An expert at the Korea Appraisal Board (KAB), which is under the land ministry, concurred.
"The number of home transactions last summer was similar to those during the global economic crisis, so it makes sense to say the housing market has bottomed out," said Park Ki-jeong, a research fellow at KAB's real estate analysis department.
Ha Yu-jung, a researcher at GG Auction, said the successful bid rate in February is a clear sign of the property market's recovery.
"It takes time for government measures to translate into the auction market but the fact that the rate almost entered the 84-percent range shows that the market is ready to bounce back."
She also said the auction market has reacted positively to the series of government measures introduced from April 2013.
The measures include lowering the acquisition tax rate on properties worth less than 600 million won ($564,000) from 2 to 1 percent of the price and cutting the tax rate on homes valued at 900 million won or more from 4 to 3 percent of the value.
"The measures were unveiled in April, August and December, and the successful bid rate rose in each respective month or a month after."
Cho said the redevelopment projects in southern Seoul are likely to influence those in other areas in Seoul and nearby regions.
"The successful projects planned in Gangnam-gu, Seocho-gu and Songpa-gu will call for other projects to begin in Mokdong, Bundang, Pangyo and in and around the nation's capital where redevelopment is necessary," he said.
"With the eased regulations, the home transactions in those areas will continue to rise for the time being."
He also dismissed speculations that the possible increase in interest rates by the government will slow down the recovery of the housing market.
"Among the government measures is the 2 percent interest rate of the government loan program worth over 10 trillion won," he said.
The interest rate set by the Bank of Korea was 2.5 percent, and according to Cho, the central bank will likely raise this by 1 percentage point at most in the coming years.
"People will continue to borrow money from the banks as they won't find it burdensome," he said.
On the other hand, Lim and Park speculated that the government will not likely raise the interest rate in order to boost the real estate market.
"Increasing the interest rate could hurt the government's effort to reinvigorate the sluggish property market," Lim said.
"The government would be in over its head if it comes up with such a decision, which contradicts its ongoing efforts," Park said.
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