"No improvement in move-in volume within 5 years"... Director Kim In-man predicts continued rental crisis in Seoul

An analysis has been presented regarding the structural changes in the Seoul real estate market and the future outlook for housing supply. Director Kim In-man addressed the issue of insufficient move-in volume in Seoul and changes in the rental market in a monthly special lecture video on the YouTube channel 'The Man Who Explains the Economy (Kim Kwang-seok TV)'.

"Difficult to improve move-in volume within 5 years"... Prediction of continued rental era

Director Kim In-man predicted that it will be difficult for the move-in volume to improve over the next five years. Kim cited the fact that even if construction begins now, the construction period takes about 4 to 5 years, unlike in the past. He explained that the construction period for large-scale apartment complexes has lengthened due to the impact of rising construction material costs and labor costs, the Serious Accidents Punishment Act, eco-friendly regulations, and the 52-hour work week. Coupled with this supply delay, he predicted that the rental phenomenon will continue for at least five years.

Seoul real estate upward trend and changing patterns of Gangnam and Gangbuk}

Regarding the trend of the Seoul apartment market, the analysis was conducted based on the weekly sales price index fluctuation rate from the Korea Real Estate Board. Kim mentioned that the sales price index of Seoul has maintained an upward trend for the past 86 weeks and has never fallen below the equilibrium line (0%). However, he explained that the speed of the increase has volatility, much like the speed of a car, and showed a pattern where the magnitude of the increase was adjusted depending on the lifting of land transaction permit zones or tax uncertainties.

Changes in regional trends were also mentioned. He explained that while the growth rate of Songpa-gu was overwhelmingly higher than that of Nowon-gu last year, the trend has changed this year, with Nowon-gu showing a higher growth rate. Kim analyzed that after the Gangnam-centered rise, the upward trend continued to the Han River belt, and after the designation of regulated areas, the upward trend showed a structure of spreading to Gangbuk and Gyeonggi Province.

Qualitative differences in declines and causes of provincial rental shortages

Regarding the cause of falling house prices, he distinguished between 'declines caused by fear' and 'declines caused by rational choice.' He explained that during the period of interest rate hikes by the U.S. Federal Reserve (Big Step, Giant Step, etc.) in the second half of 2022, fear caused by uncertainty spread to the market, forming a decline period. On the other hand, he analyzed that the appearance of fire sales early this year was due to rational choices following changes in taxation, such as demand seeking to sell before the implementation of heavy capital gains tax.

Furthermore, regarding the rental phenomenon appearing simultaneously in Seoul and provincial areas, he pointed out different regional causes. He explained that while the cause in Seoul is the shortage of move-in volume, the loss of housing due to reconstruction and redevelopment, and the contraction of rental supply due to regulations, provincial areas are experiencing structural problems where rental supply is not secured because demanders do not buy houses in a situation where defending against inflation is impossible despite the large supply volume.