"Interest Rates Could Approach 4% Next Year"... Caution Advised for Non-Apartment Market Amid Surge in Auction Properties

As the trend of rising base interest rates becomes clearer, uncertainty in the real estate market is increasing. With a distinct direction toward rising interest rates, buyer sentiment is shrinking due to the increased burden of loan repayments, and market changes are being detected, such as a surge in auction properties, particularly centered on non-apartments.

Direction of Interest Rate Hikes is Clear... "Possibility of Approaching 4% Next Year"

Sim Hyeong-seok, a member of the Finance with Toad Tax Accountant channel, analyzed the current interest rate situation and future outlook. According to the video, while the current base interest rate is at the 3.0% level, there is a forecast that if three additional hikes are implemented this year, interest rates could rise to nearly 4% next year. The presenter explained, "If there are about three hikes this year, the direction is very clear," adding, "We should view it as approaching nearly 4% next year." Although next year's interest rate prediction is often mentioned at the 3.5% level, the analysis suggests that the possibility of it being higher cannot be ruled out.

This upward interest rate trend is directly affecting buyer sentiment. The presenter diagnosed, "There is a significant portion where buyer sentiment is shrinking," and pointed out that the difference from past periods when interest rates rose sharply is that loan regulations are being strictly enforced now. He added that while there was a time in the past when interest rates surged about sevenfold from 0.5% to 3.5% in less than a year, the impact is different now because loan limits have decreased compared to the past, falling to 600 million won, 400 million won, or 200 million won.

However, in the case of the low-priced apartment market, it was analyzed that buying demand may still be maintained due to demand utilizing first-time homebuyer loans, etc. For example, if it is possible to borrow up to about 600 million won when purchasing an apartment worth 900 million won for the first time, one can compare the principal and interest repayment amount with monthly rent depending on income levels. The presenter said, "For an apartment worth nearly 1 billion won, monthly rent can reach nearly 2 million won, so compared to principal and interest repayment, the difference is only about 10 million won per year," and "It is realistic to see that there will still be buying demand for these low-priced apartments." However, he warned that if interest rates continue to rise, low-priced apartments with high loan ratios could suffer a greater blow.

In terms of asset management, he recommended prioritizing loan repayment over investing using surplus funds. While many people who have gained surplus funds due to the recent semiconductor boom are considering investing, the presenter emphasized, "In a situation like this, it is right to use it to pay off loans," stating, "Because if you reduce the principal, the principal and interest repayment amount decreases."

Auction Properties Increase by 44% Year-on-Year... 'Caution' Centered on Non-Apartments

Properties that could not withstand the interest rate burden are flooding into the auction market. The video reported that auction properties are increasing noticeably, with the growth in non-apartment products being particularly prominent. The presenter stated, "Auction properties are increasing, and non-apartment properties seem to have increased by almost double." In fact, auction properties have increased by 44% compared to last year.

Specifically, it was found that non-apartment products close to urban living houses, multi-family houses, and officetels are appearing frequently in the auction market. On the other hand, in the case of apartment properties, the apartment auction market showed a difference from non-apartments, with the winning bid ratio moving around 100%. In the case of apartment auctions, there are cases where dozens of bidders flock when a property comes out, but the situation is different for non-apartments. The presenter advised, "Properties for those with lower financial capacity or in terms of product type are coming out more in the non-apartment sector," and "When investing in non-apartments, you must closely observe the auction market situation."

Relocation of Public Institutions and Tax Reform... Attention to Market Variables

Other variables in the real estate market include the second relocation of public institutions and the tax reform plan. The relocation of public institutions to provinces, including Sejong City, may act as a positive factor in the short term, but the living environment is expected to be a key variable. The presenter analyzed, "Rather than leading to immediate buying because public institutions are moving down, there is a high possibility they will live as tenants for the time being," and "How well the living environment is established will determine the timing of the transition to buying."

In particular, Sejong City has experienced a 'rollercoaster' in the past, where prices surged due to the issue of public institution relocation and then fell again. The presenter pointed out, "The living environment is key for other regions as well as Sejong," and "Rather than the government dispersing public institutions to many places, a 'concentration' strategy is needed to focus them on hub cities such as Gwangju, Busan, Daejeon, and Daegu." The opinion is that a dispersed form of relocation is difficult to achieve practical effects.

Regarding tax reform, it was viewed that market movements could change depending on the results of discussions in the National Assembly of the Republic of Korea. There is expectation as to whether a National Assembly amendment will emerge in a situation where the Democratic Party of Korea's demands have not been reflected in the government, and the situation is such that discussions could start from November and a conclusion could be reached around December. Especially in high-priced housing clusters such as Apgujeong-dong and Daechi-dong, the direction of the upcoming tax reform announcement is expected to determine buying and selling trends as the generational shift of asset owners and changes in cash flow coincide. The presenter mentioned that in the case of Apgujeong-dong, the proportion of asset owners in their 30s and 40s is about 25%, which is lower than Seongsu-dong or Banpo (35%), suggesting the impact that changes in the cash flow of prospective retirees will have on the market. The presenter advised a cautious approach, saying, "It is better to watch the trends before moving regarding tax reform."