尹 Dismisses Impeachment vs Citation? Real Estate 'This' Is Not the Only Change Amid Political Chaos

■ Broadcast: YTN Radio FM 94.5 (09:00-10:00)
■ Host: Reporter Cho Tae-hyun
■ Air date: January 13, 2025 (Monday)
■ Talk: Yoon Ji-hae Real Estate R114 Senior Researcher

* 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): How about a hot issue hot place in a hot area? It's time. I'll go through the real estate news. Today, we will be joined by Yoon Ji-hae, senior researcher of Real Estate R114. I have you on the phone. Is the researcher here?

◆Yoon Ji-hae, Senior Researcher at Real Estate R114 (hereinafter referred to as Yoon Ji-hae): Yes, hello.

◇ Reporter Cho Tae-hyun (hereinafter referred to as Cho Tae-hyun): Yes, hello, researcher. Let's take a look at the jeonse market first today. I've told you several times that the jeonse market for apartments in Seoul continues to rise high, but it's turned downward. What is the flow of the property now?

◆Yoon Ji-hae: We need to look at the sale and lease. Based on the Korea Real Estate Agency, the sale price was flat for two consecutive weeks in Seoul and fell 0.03% nationwide. On the other hand, charter remained flat across the country and in the metropolitan area, but in Seoul, it turned weak for the first time in 86 weeks, falling 0.01%. If you look at our real estate R114 statistics once more, the sale price is down 0.04% nationwide and Seoul is flat, so the trend is similar on the sale side. Regarding the jeonse price, we have risen 0.01% nationwide and 0.03% in Seoul, showing slightly contradictory results in the jeonse market movement.

◇ Cho Tae-hyun: Then how do I see the flow now? Should I say that it's right to slow down a little?

◆Yoon Ji-hae: Overall, loan regulations have been affecting the trading market since last year, but there is also liquidity pressure on the jeonse market. Recently, as large complexes continue to move into Gangdong-gu and Dongdaemun areas in Seoul, some of them are affected, and there is also a seasonal off-season effect in winter, so it can be said that this is an atmosphere that suppresses demand. However, since the contract structure is currently 1 to 1 between jeonse and monthly rent, and 50 to 50, the price on the monthly rent side is still rising and the number of apartments tends to decrease toward the second half of the year, so the downward trend is not expected to continue.

◇ Cho Tae-hyun: First of all, what should I say now? Can you understand it like this?

◆Yoon Ji-hae: In a way, there are some breathing effects from loan regulations, such as trading and jeonse, and in the meantime, political or institutional uncertainties are added, so consumers now tend to dislike decision-making parts. Since the lease on a deposit basis market also has such forms as renewal of contracts, demand movement is more limited accordingly.

◇ Cho Tae-hyun: Now that you've mentioned political uncertainty, let's start with this part. Housing is expected to face a supply cliff again this year, but there are many places where apartments scheduled for sale have not yet confirmed their detailed schedules. Should this also be considered to be affected by political uncertainty?

◆ Yoon Ji-hae: There's actually a lot of political uncertainty that affects that part, that's the supply part, but it's actually affecting more of these things like the financial situation of construction companies. In addition, last year, as procurement interest rates rose and construction costs increased, there were situations where construction companies were conservatively promoting the project, and this year, there are some businesses that were doing well mainly in the metropolitan area, but there are many areas where unsold houses have already accumulated. If you focus on the local area, the number one priority is to use up the unsold property centered on existing businesses. In the process, new businesses are minimized, so as a result, sales volume or supply parts are inevitably viewed more conservatively.

◇ Cho Tae-hyun: It seems unlikely that the sale will be done properly in a situation where profitability has deteriorated, it is difficult to raise funds, and mid-sized construction companies have collapsed recently. However, Minister of Land, Infrastructure and Transport Park Sang-woo recently hinted at resigning to take responsibility for the Muan disaster. Wouldn't this increase uncertainty?

◆Yoon Ji-hae: If these parts of the Ministry of Land, Infrastructure and Transport, which is the main ministry, also affect political uncertainty, it can be seen that there may be some revisions to the housing supply policy. However, considering this part of the point where supply expansion is necessary, there is a consensus in both ruling and opposition parties. So, there are certainly reasons for temporary delays, but it is judged that there is no need to recognize that all existing supply policies will be eliminated prospectively.

◇ Cho Tae-hyun: There may be some delays or changes, but there is no possibility that all of them will be canceled in general. However, we have no choice but to continue to talk about political uncertainty. The possibility of an early presidential election is also being discussed. If impeachment is cited or dismissed, how do you think the policy or the overall trend of the real estate market will change?

◆Yoon Ji-hae: I don't usually look at political issues as an area of prediction. But if you make a prediction, do you end up citing or dismissing impeachment as you said, so policy or political needs to be distinguished from what changes or doesn't change when we look at the market. So what changes according to these political issues can be seen as tax policies in a broad sense. So isn't there an issue of tax cuts for the rich in areas where there is no agreement between the ruling and opposition parties? So I think there are parts that change rapidly depending on these impeachment-related issues. Aren't there various systems such as the three lease laws? There are issues that have been promoted by the Yoon Suk Yeol government, but the direction may become a little ambiguous. And there may be parts that are slightly different from the business entity's side. If the Yoon Suk Yeol government prioritized private autonomy, perhaps the opposition party's pursuit tends to prioritize those that lead projects on the public side, so these things change. It is necessary to focus on things that do not change. First of all, there is no disagreement between the ruling and opposition parties on matters related to supply expansion, including the 3rd new city, the 1st new city maintenance project, or the simplification of procedures in the redevelopment and reconstruction maintenance project. In addition, there is a consensus that loans should be managed in terms of loan regulation even for household debt-related issues since last year. And there are now improvement issues related to transportation, and these are also parts that the ruling and opposition parties have partially agreed on, so you need to focus on areas that do not change. You can see it like this.

◇ Cho Tae-hyun: There will be changes, uncertainties and delays, but there will certainly be things that will not change. You have to focus on this part so that you can see some opportunities. Another thing to look at is that the Financial Services Commission recently announced that it would lower the proportion of jeonse loan guarantees. What do you mean by lowering this rate?

◆Yoon Ji-hae: The financial authorities are now considering lowering the guarantee ratio of guarantee insurance from 100% to 90% and further lowering it in the Seoul metropolitan area, as the scale is now 200 trillion won. In the case of the Financial Services Commission, the three major guarantee institutions, the Korea Housing Finance Corporation, the Korea Housing City Guarantee Corporation, and the Seoul Guarantee Corporation, decided to unify the lease loan guarantee ratio at 90%. Looking at the current guarantee ratio, the Korea Housing Finance Corporation is around 90%. The remaining warranty agencies are 100%. In addition to this, the Financial Services Commission said it would consider further lowering the guarantee ratio for the Seoul metropolitan area, but the financial sector now expects that 80% of the guarantee ratio in the Seoul metropolitan area may be applied.

◇ Cho Tae-hyun: Okay. But the real estate market itself is cold right now. In this situation, what should we see as the background of reducing the proportion of loan guarantees like this?

◆Yoon Ji-hae: There have been structures that guarantee the full amount of lease on a deposit basis loans. As a result, the financial authorities believe that this has led to excessive supply of guarantees. On top of that, there was certainly an aspect that the lease on a deposit basis loans provided liquidity to the landlord and this acted as a vicious cycle of raising housing prices again in the form of gap investment. As a result, it aims to actively manage the increase in household debt as the total amount of loans itself decreases by reducing the guarantee ratio. However, what we were concerned about last year was that DSR, or the total debt principal and interest repayment ratio, was also introduced to the lease on a deposit basis, but it has been temporarily put on hold for now as the lease on a deposit basis price has recently fallen a little.

◇ Cho Tae-hyun: Okay. The overall flow itself goes that way. We all know that there are many side effects of jeonse loans. But even so, there must be people who need it, are there any concerns about the side effects that landlords will suffer from?

◆Yoon Ji-hae: There are side effects between the landlord and the tenant. Among them, the biggest side effects are expected to be the rise in housing costs for the low-income class as the loan limit is reduced and the monthly rent of jeonse accelerates. In addition, landlords and landlords are expected to experience a liquidity crisis as they have difficulty returning the deposit on the lease, which in some cases can turn into a lease fraud. Accordingly, there are areas where social side effects can be derived. However, it is expected that landlords who can afford to take this opportunity to change the contract structure in the form of guaranteed monthly rent.

◇ Cho Tae-hyun: Okay. We've looked at the overall situation. I've looked at the charter and I'll also go to the auction market. When it comes to auctions, we often recognize it as a leading indicator to see the real estate market, but looking at the number of apartment auctions, it is the largest since 2013. What do you see as this background?

◆Yoon Ji-hae: Some parts of the auction market now precede us. And there's data that follows. The auction data you mentioned is actually closer to the trailing indicator. To illustrate, on the auction data side, this number of auctions is generally overdue and we go into a legal process where banks collect their bonds by arbitrary auction forms. Therefore, if you are overdue for more than three months, you will enter a voluntary auction process. And even if we go into the auction process now, it usually takes about six months to a year for the appraisal to be done thereafter and then it comes out as an auction item on the actual market. As a result, it cannot be evaluated that the current increase in the number of auctions has entered the recent auction process. So, I'll explain that there are some vague points that simply explain that the recent atmosphere is not good as the number of auctions is the highest ever. Recently, the Bank of Korea has cut interest rates twice compared to the previous year, and the market interest rates have been falling a little. In the past, there were many cases where the number of auctions increased due to interest burden a year or six months ago, but this year, procurement rates have fallen a little, so it is difficult to say definitively that it represents the recent atmosphere.

◇ Cho Tae-hyun: It's hard. It seems that the background is mixed, but there is a possibility of lowering the base rate again, so we have to wait and see what changes there will be. Lastly, please finish with a line review of the real estate market this week.

◆Yoon Ji-hae: To explain based on the weather conditions, it seems possible to evaluate the policy and the real estate.

◇ Cho Tae-hyun: It seems poetic, it seems agitated, and it's all frozen. Should defrosting the real estate market like this be considered a little difficult for the time being?

◆Yoon Ji-hae: I think it will be difficult to resolve it during the first quarter.

◇ Cho Tae-hyun: Okay. For the time being, it seems that we will have no choice but to go as we continue to be hit by the cold wind in the real estate market. So far, I have pointed out various real estate issues with Yoon Ji-hae, a senior researcher at R114 Real Estate. Thank you for talking today.

◆Yoon Jihae: Thank you.