2025 Real Estate Market, 3 Reasons To Pay Attention To Monthly Housing

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: December 31, 2024 (Tuesday)
■ Talk: Lee Seon-ho, Deputy Director of Woori Bank Asset Management Consulting Center

* 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): Yes, it's the last corner of YTN Radio Live Economy in 2024. It's a time for the rich to listen to various information to become rich from experts in each field.Today, we will be joined by Lee Sun-ho, deputy director of Woori Bank's Asset Management Consulting Center.Please come in.

◇ Lee Sun-ho, Deputy Director of Woori Bank's Asset Management Consulting Center (hereinafter referred to as Lee Sun-ho): Yes, hello. I'm Lee Sun-ho, Deputy Director.

◆ Cho Tae-hyun: It's the last day of 2024, and tomorrow is the new year. It's a bittersweet situation where I'm turning a year older, so I'm trying to point out what I should pay attention to next year's real estate market, what can you point out?

◇ Yes, in 2025, there are a lot of variables both internally and externally. I'd like to pick monthly rent housing as a trend to pay attention to next year's real estate market, which is expected to be explosive.

◆ Cho Tae-hyun: Rent-a-month house.

◇ Lee Sun-ho: It is true that the transition from charter to monthly rent has been going fast since a few months ago. Recently, however, global real estate institutional investors have been paying attention to the Korean monthly rent housing market, with institutional investors rolling large-scale assets such as Morgan Stanley, Invesco, and Heinz.

◆ Cho Tae-hyun: The commercial real estate market in the U.S. doesn't seem to be very good either, so why are you interested in our country?

◇ Lee Sun-ho: Yes, first of all, I think the Korean housing monthly rent market recognizes that it makes money.

◆ Cho Tae-hyun: It's going to come because of this money.

◇ Lee Sun-ho: That's right. We believe that the housing monthly rent market is expanding. As you said, it was a large-scale commercial real estate investment, but now it has begun to include residential real estate in its portfolio. On a large scale, it seems that the monthly rent housing market is a little attractive while looking at the social, economic, and institutional changes.

◆ Cho Tae-hyun: Ah, social, economic, and institutional changes have become such a situation that makes the monthly rent housing market in Korea attractive as an investor. We need to look at what you're talking about. What do you mean by social change?

◇ [Lee Sun-ho] Yes, the most important thing is to change the demographic structure. Also, the ratio of jeonse to monthly rent is increasing due to the increase in one or two-person households due to the decrease in marriage rate, birth rate, and extended life expectancy. And as you know well, social awareness has deteriorated a lot due to the aftermath of the lease on a deposit basis fraud. There is a growing perception that it would rather pay a fixed monthly rent than the risk of not being able to return the deposit. And we can't ignore the polarization of wealth. As the gap between income and assets widens, relatively low-income groups prefer monthly rent. And in the case of high-income families with several houses, it is more expected to supply monthly rent that can generate cash flow cash as a rental business operator.

◆ Cho Tae-hyun: So you're going to go to the monthly rent. In fact, charter is a bit of a unique structure that can be maintained only when the environment of high interest rates and high growth is maintained, so it seems natural to disappear. What are you referring to in terms of economic change?

◇ Lee Sun-ho: Yes, the Bank of Korea's report on the potential growth rate of the Korean economy released this month estimates that the potential growth rate will fall from the current 2% growth rate to the 0% level in 15 years. From the past period of high economic growth that has been enjoyed so far, it is estimated to be a long-term low-growth phase in the future. In the future, the direction of real estate investment will inevitably increase interest in income from any rental income rather than capital gains from any increase in value.

◆ Cho Tae-hyun: So you have to pay more attention to rental income rather than real estate prices going up, and as I said, the monthly rent will eventually accelerate because the environment itself cannot be maintained due to high interest rates and high growth. You can see it like this, but finally, what is this institutional change?

◇ Lee Sun-ho: Yes, the new rental housing supply plan announced by the government in August is expected to ease regulations and taxes related to rental housing in the future and revitalize corporate rental projects. Of course, institutional support is expected in the mid to long term rather than activation in the short term. Perhaps global big players have also been watching this policy more closely. And the other thing is that continuous loan regulations to reduce household debt cannot be ignored. This will limit the liquidity supply of lease funds, which will accelerate the transition to monthly rent housing. Housing policy is actually aimed at stabilizing housing, and long-term rental housing supply is expected to be a new normal in the future to stabilize housing prices and reduce household debt.

◆ Cho Tae-hyun: Well, I think things like jeonse will be a little reluctant because there are problems like jeonse loans, and the monthly rent will be better. If monthly rent housing becomes common, this is also a shopping mall if apartments are a traditional rental product. Is there a possibility that apartments will replace this?

◇ Lee Sun-ho: It will take a while, but I personally believe that the representative of rental products is likely to change from a shopping mall to an apartment. If you look at it, apartments have more diverse uses than shopping malls. Then, the vacancy rate is low and the exchange rate of buying and selling is quite high.

◆ Cho Tae-hyun: It's easier to buy and sell.

◇ Lee Sun-ho: That's right. Especially through COVID-19, the time spent staying at home has increased as it is used as a space for various activities such as exercise, work, hobbies, and entertainment. This has increased its utility. In the past, the effectiveness increased as the characteristics of user goods were added, not just sleeping and eating. It is expected that this will manifest itself as monthly rent and monthly rent.

◆ Cho Tae-hyun: That's right. As expected, the house is the best. I don't want to go outside. I'm scared outside the blanket. In terms of the risk of vacancy, in recent years, the vacancy in shopping malls is very serious. In terms of this risk, can I say that apartments can be free from risks?

◇ Lee Sun-ho: That's right. As you know well, sales of shopping malls have been decreasing a little as the online market has accelerated and the number of productive people who can consume has decreased a little recently. As a result, sales will inevitably increase the risk of vacancy in the space. But apartments have a very low risk of vacancy. If you look at the reason, the population may decrease, but the number of households will increase due to the increase in the number of 12-person households.

◆ Cho Tae-hyun: So the population has decreased, but the number of households that will live in the house itself will increase.

◇ Lee Sun-ho: And construction costs are rising and supply is decreasing again due to the long-term recession. Demand is overflowing, but the number of households increases, and the supply decreases, so the risk of vacancy is inevitably low. And because apartments have management offices and communities, they are now somewhat easier to manage and operate tenants than shopping malls.

◆ Cho Tae-hyun: Oh, okay. In many ways, I think apartments would be more convenient than shopping malls to manage, but if there is anything to tell investors to be careful about this, to be aware of this?

◇ [Lee Sun-ho] Yes, it's actually a time when the dichotomy between commercial and residential use is going away. Isn't the era over for thinking in such a dichotomy as liberal arts and science?

◆ Cho Tae-hyun: These days, it's the age of hybrids.

◇ Lee Sun-ho: That's right. Since it is an era of convergence, when we invest from an investment and economic point of view, apartments are not commercial products, but in a way, if they are profitable, they will pay rent if they have spatial utility, and if they can generate revenue from this rent, they can invest. You need to be aware of this. In the future, we carefully expect such spaces called apartments to be able to establish themselves as representative monthly rent profitable products with complex functions as business leisure and commercial housing functions converge.

◆ Cho Tae-hyun: Okay. What should I be careful about when choosing a product? Are location and things like that the most important?

◇ Lee Sun-ho: Of course, the location of our residential products is important now. First of all, in terms of stability, you have to look at a large-scale complex with exchange rates, and I think it's better near a station with a lot of convenience facilities.

◆ Cho Tae-hyun: It's almost the same as the conditions you live in. Well, the conditions of residence must be good so that the monthly rent can be paid well as an investment. So far, I have delivered precautions for next year's real estate trends and investors with Lee Seon-ho, deputy director of Woori Bank's Asset Management Consulting Center. Thank you for talking today.

◇ Thank you.


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