South Korea's Real Estate Market: Prolonged Downturn and Challenges

The real estate market is in a steep downturn, exacerbated by rapid interest rate hikes, with a potential seven-year decline ahead.

### Current Real Estate Downturn: Analysis and Predictions
* 📉 The real estate market has officially entered a **significant downturn**, which is expected to last **around seven years**, with declines observed since 2022.
* 🏠 In Seoul and the metropolitan area, apartment prices have **dropped significantly**, marking **one of the largest declines in history**, driven by **rapid interest rate hikes**.
* 💰 The impact of interest rate increases is compounded by incidents like the **Legoland and Heungkuk Life situations**, which have **further destabilized the market**.
* 🔥 The current pace of interest rate hikes is **unprecedented**, comparable to the IMF crisis and the 2008 financial crisis, exacerbating the already **declining market conditions**.
* 📅 Looking ahead, the downturn could extend through 2027, followed by a **U-shaped recovery period lasting one to two years**, delaying any potential rebounds until around **2030**.
* 📊 The number of unsold properties is increasing rapidly, particularly in Gyeonggi Province, where unsold units **rose by 75% in just one month**, indicating a troubling trend.
* 🔍 It's crucial to monitor the government's policy responses during this time, as any **hasty decisions could lead to slight rebounds in the market**.
* 🌀 Overall, the real estate market is facing a challenging environment, with **rising unsold units and declining rental prices** contributing to a **potential rental crisis** in the coming years.

### The Current Downturn in the Real Estate Market
The real estate downturn is expected to last for **up to seven years**, with significant price declines in Seoul and across the country. The rapid and strong interest rate hikes are a major factor driving the downturn, causing a ripple effect with incidents like **Legoland and Heungkuk Life**. The current pace of interest rate hikes is **unprecedented**, comparable to the **IMF crisis**, and has exacerbated the market's decline, which was already in a **stagnation phase** before the hikes began.

### The Future of the Real Estate Market
The real estate market is currently in a downturn, exacerbated by **aligned interest rate hikes**, and is unlikely to improve next year. The decline is expected to last for about **seven years**, with a potential bottom around **2027**, followed by a **U-shaped recovery**. **2030** is anticipated to be the optimal time for buying, as there will be a serious attempt at **rising prices**, but a clear **upward trend** is preferred before investing.

### The Challenges of Price Dynamics in Individual Investor Markets
In a market with only individual investors, it's difficult for prices to rise solely from buying, leading to a **cautious strategy among investors**. Attempts at collusion to raise prices are ineffective, resulting in **stagnant or declining prices**. The real estate market's recovery is complex, with sporadic buyers and decreasing supply of rentals and jeonse contributing to the **eventual rise in asking and transaction prices**.

### The Impact of Decreasing Jeonse Supply on Rental Market
Jeonse prices are stable despite a decreasing supply of rentals, leading to a transition to **monthly rent for investors**. The current high-interest rates create an unusual situation where monthly rent is **temporarily lower than interest payments**. As investors attempt to increase monthly rents, the supply of jeonse decreases, leading to a potential rental crisis as homeowners become tenants and **demand for rentals rises**.

### The Impact of Unsold Units on the Market
Unsold units accumulate when buying sentiment declines, creating a cycle that **worsens the sentiment further**. There is a time lag of **two to three years** before the number of distributions starts to decrease in response to a market decline. The current increase in unsold units, particularly in Gyeonggi Province, is significant, with a **75% rise in just one month**.

### Rapid Increase in Unsold Housing Units
The number of unsold housing units in Daegu has **surpassed 10,000** and is **increasing rapidly**. Gyeonggi Province has also seen a significant rise, currently **exceeding 5,500 units** and potentially **reaching 10,000 by early next year**. The overall trend indicates a possibility of **approaching peak figures of 30,000 to 40,000 units**, making the current situation **risky**.

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