[Money Talks] Inflection point for apartments in the metropolitan area… Signal of austerity and supply ‘within 5km’

The apartment market in the metropolitan area has reached a clear inflection point.

The rate of increase in apartment prices in Seoul has slowed for two weeks and has begun to take a breather. While Gangnam and Seocho have been falling for 12 weeks and Songpa for 8 weeks respectively, an upward trend similar to height matching continues in parts of Seoul and southern Gyeonggi Province.

While expectations for annual growth of 4% are high, concerns about high inflation and household debt remain. The possibility of a further increase in the base interest rate and monetary tightening by the central bank, the Bank of Korea, is greater than ever. In an era of austerity, it is difficult for real estate growth to continue indefinitely. Amid the wave of high interest rates that have hit the world, an ebb of austerity is also flowing into our real estate and stock markets. It won't be long before the real estate bubble in the metropolitan area will clear and reveal its true face.

In this situation, the government's 'new public housing land for 76,700 households in the metropolitan area' card could be a catalyst that increases downward pressure on the market. The government announced six locations in the Gyeonggi region as new housing site candidates, including Gimpo Ara (37,000 households), Gurigeonwon (14,600 households), Hanam Misa K-Culture (12,000 households), Hanam Gamil 2 (6,500 households), Uijeongbu Darakwon (2,600 households), and Goyang Daegok Knowledge Convergence Expansion (4,000 households). These areas are 'within 5km of the Seoul border', and can serve as a catalyst to cool down the so-called 'panic buying' of real consumers living in the metropolitan area who are driven by anxiety.

The government's supply signal could be a catalyst that increases price adjustment pressure across the metropolitan area. This is because there will be consumers who think, “I would rather wait for public sales than take out too much debt and buy a property on the outskirts.” When chasing purchases in the outskirts stop and turn into waiting demand, the prices of properties that were holding out will also be adjusted downward.

However, in terms of the size of the stabilizing effect, this measure is somewhat disappointing. In this announcement, key sites in downtown Seoul, such as the returned site of the Yongsan U.S. military base, Segok and Jagok in Gangnam, Naegok in Seocho, and Suseo, were excluded. Even in the Gyeonggi-do region, which is adjacent to Seoul, it is difficult to fully satisfy the core demand for direct proximity to the city center and high-quality infrastructure, and there are limits to alleviating the anxiety of consumers seeking upper-class areas in the city center.

In order to maximize the efficiency of supply measures, 'supply in core areas of downtown Seoul' must be realized.

The Ministry of Land, Infrastructure and Transport must give up its impatience. Not only should we touch the Gyeonggi-do development restriction zone (greenbelt), which is the border area, but we should not avoid easing complex urban maintenance regulations or coordinating with local governments, even if it takes time.

The city of Seoul also cannot escape responsibility for failing to come up with an alternative to resolve the supply drought in core urban areas quickly enough for the market to feel. The principles of Yongsan's park creation and the philosophy of preserving urban green space must be respected, but we must actively engage in policy compromises that combine idle urban land, high-density development near subway stations, and public and private maintenance projects to avoid disruptions in urban supply during the supply cliff phase in which citizens are suffering. The city of Seoul should not just advocate for the preservation of future green space, but should think from the citizens' perspective.

Andre Kostolani, a master of stock investment, was convinced that “in the short and medium term, psychology determines 90% of the stock market.” The real estate market, like the stock market, is a psychological battlefield where human greed and fear determine prices.

If the announcement of housing sites on the outskirts is a first-stage device to increase downward pressure on the market, the supply of core sites in downtown Seoul must also be completed so that the housing market in the metropolitan area can settle on the track of long-term supply and demand stability and the psychology of actual consumers can be fundamentally calmed.

The moment the psychology dominated by greed and fear, such as “Now is the cheapest” and “If you don’t buy now, you will never buy,” changes to a wait-and-see mentality such as “It may fall further” and “You can buy a better product later,” the market finds stability to the point where you wonder if it has ever been that way.