In Trump's 1st term, the 2nd part of real estate 'vitalization' is the same? "The key is interest rates".

- Seoul's apartment auction volume is the highest in nine years "interest burden due to loan regulations↑"
- Nowon's bid for the 'Young Kkljok' preferred land, 'polarization'
- Why does Seoul apartment prices show no signs of falling? "Buy-sell common dream"
- Trump's 1st term rises in the real estate market due to ultra-low interest rates and massive stimulus
- Trump's 2nd term, real estate impact depending on the speed and breadth of rate cuts

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: November 12, 2024 (Tuesday)
■ Dialogue: Song Seung-hyun, city and economic representative

- Moving in to the Seoul metropolitan area's green belt-free area in 2031, land compensation plan ambiguous
- Supply disruption and timing may be difficult in the event of land compensation backlash

* The text below may differ from the actual broadcast content, so please check the broadcast for more accurate information.


◆ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): Part 2 begins with the hot area, hot issue <How about there> time. Today, we will talk about real estate with Song Seung-hyun, Toshiba's economic representative. Is the CEO here?

◇ Song Seung-hyun, city and economy representative (hereinafter, Song Seung-hyun): Yes, hello.

◆ Cho Tae-hyun: Let's take a look at the apartment auction first. The number of apartment auctions in Seoul was the highest in nine years. This came out. But the successful bid rate was not that good. I think these two are a little different stories, but why did this happen?

◇ Song Seung-hyun: First of all, if you look at the overall contents, the number of apartment auctions in October is 3,493 across the country. The number of auctions in the previous month was 2,933, that is, less than 3,000. Compared to then, it has increased by 19.1%. There are 380 cases in Seoul. The 380 cases themselves can be seen as the highest number since 410 cases in April 2015. And compared to the previous month, it has doubled. There were 809 cases in Gyeonggi-do as well as Seoul, which is the highest in 10 years since 845 cases in December 2014. If you look at this, you can see that overall interest burdens on interest rates have continued to pour out into sales. In addition, as the recent loan regulation has dampened the buying trend, it should be said that sales are accumulating. In addition, the successful bid rate is about 40%, but compared to the previous month, it increased by about 3.3 percentage points, but in the case of Seoul's successful bid rate, it is 41.3%, which is lower than the previous month. As I said before, this trend itself has appeared since the regulation on loans came in, so I think it should be considered as an overall loan regulation and interest rates.

◆ Cho Tae-hyun: In a way, it's like an indicator of a change in the flow of the real estate market. It was said that there was a bid in the Nowon area. If it's Nowon here, isn't the so-called Young Kle people's preferred area?

◇ Song Seung-hyun: Yes, that's right. As I said earlier, raising interest rates and strengthening regulations on loans are a situation that will inevitably hurt. Now that Nowon-gu is a place where mid- to low-priced apartments are concentrated, as you said, it is an area where a lot of people in their 20s and 30s, called the Young Kkuljok, come in. So in the past, people used loans to buy a lot of houses during low-interest rates, but in recent years, interest rates have risen and the real estate market has continued to stagnate until early this year. So, there were many cases that were handed over to auctions, but recently, there have been quite a few cases of such bidding in the auction market in Nowon-gu and outside Seoul. And in Seoul, the preference for apartments is high, but the successful bid rate for apartments in Nowon-gu fell 3 percentage points from 45.6% to 41.3% in October. Recently, if I meet investors, these people, and the younger generation for counseling, or if I see those cases, I think these parts of the loan that we keep pointing out are very burdensome. The interest burden has increased because of the interest rate hike. Then, the real estate market was on the decline and recently rebounded, but as loan regulations have occurred recently, there are cases in which real estate is difficult to survive, such as disposing of it as a sudden sale or passing over to an auction.

◆ Cho Tae-hyun: Okay. The reason we look at the auction market is that the auction market acts as a leading indicator of the real estate market, and another thing to look at is that the successful bid price rate of apartments in Seoul has risen. In particular, it is said that the three districts of Gangnam have driven the rise, so isn't this polarization continuing to intensify in the auction market?

◇ Song Seung-hyun: I think you should look at it like that. Currently, the successful bid price rate for apartments in Seoul has reached a 28 month high, and it is the 3rd district of Gangnam that has reached such a high. In the case of 3 Gangnam districts, there were about 48 high-priced bids, but about 24 of them, so I think it accounts for half of them. Also, apartments in 3 Gangnam districts accounted for about 8 cases in the top 10. I think it should be considered that the popularity of the Gangnam area is that high. You just mentioned the successful bid price rate, but in the case of the successful bid price rate, we're looking at how much the auction has won in preparation for the real estate appraisal price. So, for example, the appraised price is 1 billion, but if it's sold for 900 million, it should be about 90%. But the reason why we see this successful bid price rate as important is that as our anchor said, we tend to see it as a leading indicator. Because the high successful bid price rate reflects the expectation that the auction participants are highly valued in the real estate and the price increase in the future, an increase in the successful bid price rate can be interpreted as a recovery of the real estate market and an increase. But as you said, if you look at the current average successful bid price rate in 3 Gangnam districts, it came out to about 107.5%. Then, based on the appraised price of 100, about 7.5% was sold at a high price. Then, I think it reflects the expectation that the price in Gangnam can go up further. The fact that the successful bid price rate has risen is still expected to rise in prices, especially in the high-priced areas of the three Gangnam districts. I think it's a very different atmosphere from Nowon-gu, which we talked about before. The conflicting atmosphere is that the three districts of Gangnam, including Gangse Nowon-gu, are weak, and one of Seoul's outskirts is rising and the other is falling, so the possibility of polarization is growing as the distance between them widens.
◆ Cho Tae-hyun: I think this polarization is the most talked about when diagnosing the real estate market this year. Looking at the overall situation, apartment prices in Seoul continue to rise, but the rise itself is slowing down a little.

◇ Song Seung-hyun: Yes, that's right. Even if you look at the data recently released by the Korea Real Estate Agency, it should be seen as a trend that has been slowing for three weeks. Of course, the upward trend is still maintained. It's up 0.07% now, but it doesn't mean that the upward trend has stopped, but it's a slowing trend. The increase is also decreasing slightly from the previous week. So, in the case of reconstruction complexes and new construction complexes, intermittent transactions are taking place, but it should be seen as a trend in which buyers take a wait-and-see stance due to loan regulations. Despite this decrease in transaction volume, we've talked about the winning price rate recently, but we need to see why the price has not fallen, but if you look at the reason why the transaction volume is shrinking, sellers are still not lowering prices due to expectations of past highs. Then, in the case of buyers, it should be considered that the willingness to buy has been slightly weakened as the loan regulation has now taken a wait-and-see stance. So, I think it should be considered that there is no transaction because the way we look at each other is different. And the reason why prices do not fall is because the upward trend is slowing down, but it does not continue to fall. In the case of reconstruction complexes mentioned before the Gangnam area, even if you look at the auction market or the market where intermittent transactions are taking place recently, the reconstruction of the Gangnam area is still in demand, and these demands support the overall average price. And even if sales are accumulating now, in the future, it seems that buyers' expectations for a decline due to such things as supplies are also a trend that suppliers are lowering.

◆ Cho Tae-hyun: There seems to be some kind of miss matching, but I also think there seems to be a possibility that things could change rapidly in the future. But we also have to point out that Trump is the word we've said the most this week. I would also like to take a look at the part where former President Trump's victory in the presidential election will affect the real estate market. How will it affect our market?

◇ Song Seung-hyun: Overall, even if you think that the results of the U.S. presidential election itself can be felt microscopically, but if you look at it as a big chunk, I think it can have a big impact. Therefore, the reason why we think that changes can occur within the overall trend rather than the impact on each small real estate market is that the real estate market was generally on the rise at the time of President Trump. At that time, in 2020, housing prices soared due to ultra-low interest rates and large-scale support. Because of this trend, this rise also affected the Korean real estate market, resulting in an increase in prices in Seoul and major cities. What I said earlier about the big lump is that it has some influence on interest rate policy. The real estate market in Korea is related to the U.S. interest rate policy and the economic situation, so if the U.S. raises interest rates, for example, global funds flow into the U.S., putting pressure on the Korean won to raise domestic interest rates. If the U.S. cuts interest rates again, there will be enough pressure on Korea to cut interest rates, creating enough room for the real estate market to turn upward. That's why I think this ripple effect can affect the Korean real estate market. Therefore, in the case of Trump's second term, there are many comments about interest rate cuts in the future, so the Monetary Policy Committee, which is scheduled for November 24 years now, will inevitably affect the decision. Even if it's not right now, it's seen that next year can lead to such signals about interest rate cuts. Until then, of course, it is believed that these influences may not be very effective due to regulations on loans, but the speed of the rate cut and the breadth of the rate cut can affect Korea, which could also greatly affect Korea, depending on the results of the U.S. presidential election and the extent of the rate cut that the Trump crisis has to go in the future. So, I think it is necessary to carefully look at the Bank of Korea's interest rate decision in line with changes in U.S. economic policy.

◆ Cho Tae-hyun: Okay. Since the global economy is connected, any big change will affect any small part like this. Let's take a final look at what the government announced last week. They announced that they would lift some of the green belts in the Seoul metropolitan area. Looking at it, it's an area that many people would prefer among the metropolitan areas, and I think this is when the key will be. The government will move in by 2031. We're talking about this. Is this possible?

◇ Song Seung-hyun: If you look at the plans simply, it's also a possible number. Usually, when you look at the main procedures, you designate a district and develop a development plan, and within this process, there are reviews such as environmental impact assessment and traffic impact assessment. The process of establishing a development plan and evaluating it usually takes about 2-3 years. Then, land compensation and licensing construction begin, and it takes about a year or two to start construction with actual construction permits and procedures. And although the period itself varies depending on the difficulty of construction, it is generally considered to be about 3 to 4 years. Then, if there is no problem with each stage of moving in by 2031, it will proceed. As for the district designation and licensing construction I mentioned earlier, I mentioned the period, but I didn't mention land compensation. What that means is that it's very vague.

◆ Cho Tae-hyun: That's the key. Yes.

◇ Song Seung-hyun: That's right. If there is a backlash, delay in consultation, or compensation, the compensation may increase. Therefore, even in the case of the third new city, the project is underway due to land compensation. In the case of the third new city, areas such as Namyangju are also delayed due to land compensation problems, and in some areas, the land compensation rate is now below 50%. In conclusion, if the government's housing supply plan goes smoothly, 50,000 households will be able to achieve certain achievements in 2031, but as I mentioned earlier, if the land compensation problems, so-called civil complaints, are not solved, housing supply may be disrupted. So I think it's a very big task to coordinate how appropriate compensation, timing, and not too much compensation.

◆ Cho Tae-hyun: When you lifted the green belt earlier, did it ever go as planned?

◇ Song Seung-hyun: Until now, if you look at any past lifting, it was possible because the public power was strong at the time and the cost of land was a little low. However, in the case of now, the price and valuation criteria for those areas have changed a bit, and in the case of the part that is compensated now, it is difficult to accurately match the timing because it is a market where private interests have become stronger. In the past, the period was set, but the period itself was not delayed much, but even if you look at the current 3rd new city, you can see situations that are slightly more stretched than the 12th new city.

◆ Cho Tae-hyun: Because times have changed. I see. So far, I have looked at various issues surrounding the real estate market with Song Seung-hyun, CEO of the urbanization economy. Thank you for talking today.

◇ Song Seunghyun: Yes, thank you.