I don't think interest rates are a significant factor that affects real estate. When people come for consultations, they often talk about interest rates, saying, Now housing prices are going to rise. But that doesn't hold true. Here, another problem, or blind spot, is that they only think about the buyers. From the seller's perspective, it’s also beneficial. Sellers might think, Should I wait a bit longer before selling? and then withdraw their listings. 

Hello, I am Lee Hyun-cheol, the head of the Apartment Cycle Research Institute, and this is announcer Kim. Today, we will discuss interest rates. Recently, the U.S. made a significant cut by lowering the benchmark interest rate by 0.5 percentage points. Director, that’s right. As the U.S. lowers interest rates, it seems inevitable that we will eventually have to lower our rates as well. Many people are curious about the relationship between interest rates and our real estate market. So, let’s discuss that.

I will do it. Well, Director, first of all, many people commonly think that if interest rates go down, the real estate market will rise. What do you think about that? 

I believe that interest rates are not a significant factor influencing real estate. That's interesting. It's completely different from the general perception. When I was working in the field, I was someone who somewhat believed in that theory. For example, a few years ago, when I was working on-site, if interest rates were cut, it was considered good news for those who needed to sell properties. If apartments weren't selling and interest rates went down, it was seen as a positive sign. 

Right, so when people came in for consultations, they would talk a lot about interest rates, saying, Now house prices will go up. But it doesn't work that way. 

Oh, really? It doesn't work? No, in the field, even if I tell people that, it doesn't resonate with them, and when I look at the atmosphere of the surrounding apartments, they seem to...

If prices go up, our unsold apartments will also be affected and will start selling, right? But they aren't selling. While working in the field, I had this question about whether interest rates have a significant impact, so I conducted a sort of informal research over the years. The conclusion I've reached is that people hardly pay attention to interest rates. Generally, when interest rates drop, loan rates also tend to decrease. This would mean that for potential buyers, the financial burden lessens, leading to an increase in buying demand, which would create a rising trend in the real estate market. This is the logic that people typically think of when interest rates fall, but I found that this logic does not apply at all. If we break down my research systematically, we can categorize the findings into physical changes and psychological changes.

In terms of change, as you mentioned, I looked for blind spots in this logic. What I found is that when interest rates remain stable and then suddenly drop, it gives the impression that rates are decreasing steadily. However, the market does not move that way at all. People believe that there should be consistency in order to make judgments, but there are times when the benchmark interest rate is lowered, yet market interest rates can still rise. Additionally, there are instances where the benchmark rate is reduced, and while market rates may decrease slightly, the amount of loans issued actually declines. We are currently in such a situation. So, it's not simply a matter of how interest rates change that affects people's decisions; there are physical factors involved. What you mentioned about the current situation seems to fit perfectly.

The United States has now started to donate troops, but when I checked the loan interest rates yesterday, I found that the mortgage rate is at 4%. Just a few months ago, it was in the low 3% range. In fact, mortgage rates have increased. As you mentioned, the U.S. has lowered its benchmark interest rate, but our government has tightened loan regulations. This means that the loan limits are actually being reduced. So, as I listen to this, I think that looking at just the interest rate alone, we can't fully understand the rise in the real estate market. This is a physical factor. Then, there is the psychological factor. Psychologically, the idea is that generally, when interest rates are lowered, real estate or stocks tend to rise. So, if interest rates are lowered, then the psychological factor is that stocks should go up, and real estate should go up as well.

It's not that. Regardless of physical factors, if everyone thinks that psychological factors will lead to an increase, then a situation where they start buying can be created. You can imagine it. However, the problem or blind spot here is that only the buyers are being considered. Yes, it seems that only the buyers are continuously operating on the hope that things will get better. Right? Then, from the seller's perspective, it’s also good for those selling houses. In any case, both the buyer's and seller's sentiments are that they believe prices will go up. Naturally, they think it's going to rise, right? However, there is also a blind spot here. In a calm market, the buyer's psychology has been stimulated, and the seller's psychology has also been touched. So, sellers who were trying to sell their houses might think, Should I wait a bit? and withdraw their listings.

The inventory will decrease, right? Then, buyers think, The house prices are going up, so shouldn't I buy quickly? and as a result, they rush to buy, which leads to an economic phenomenon. Consequently, house prices rise. This logical structure can be valid. However, if we look at the market situation before the interest rates rise, we can see that the real estate market has been experiencing a strong upward trend until now. Ignoring this strong upward trend is a mistake. What I mean by ignoring it is that, as I mentioned earlier, the situation is relatively calm. A calm situation indicates that the market is quite stable. If there is any change in such a stable situation, it can be influenced to some extent by changes in factors. However, the market is currently moving strongly. In such cases, sellers are likely to perceive the influence more positively.

In psychology research, it is often observed that there is a significant difference in value judgment between those who own an item and those who do not. The expected value is much greater for the owner compared to the non-owner. Typically, this difference is about three times. So, what kind of phenomenon occurs? For example, let's say there is a house valued at 1 billion won. The buyer might think that since the price will likely go up, they can afford to pay around 1.1 billion won. However, the seller believes that they should sell the house for 1.5 billion won because they are not satisfied with 1.1 billion won; they think that selling it for 1.1 billion won would mean incurring a loss. As a result, the sellers list a house worth 1 billion won for 1.5 billion won. The buyers, however, cannot afford to buy it at that price.

I can't acknowledge that. I would only buy if it were 1.1 billion, and if I could somehow manage to buy it at that price. In such a situation, a transaction cliff arises, meaning transactions do not occur. As a result, the sellers' hopes diminish, but they are becoming even more excessive. What is currently exacerbating people's thoughts is that before the interest rates were lowered, the market situation was already bullish. Now, sellers are raising their prices, and with the interest rates lowered, they will likely raise them even more. I predict that soon, as I have foreseen, a situation will unfold. What you mentioned is correct; a transaction cliff is approaching. Transactions will continue to decrease. If that happens, prices cannot rise. Prices should increase gradually through continuous transactions, moving up step by step from 1 billion to 1.1 billion, 1.3 billion, 1.5 billion, and 1.7 billion. However, if the gap in transactions widens, then...

There may be one or two transactions, but then no further transactions occur. For example, someone bought a house worth 1 billion for 1.5 billion. So, will the sellers continue to sell at 1.5 billion? No, they absolutely will not sell. Then, what will the next selling price be? Will it go up to about 1.7 billion? Oh, maybe even 2 billion. So, if the price was burdensome at 1 billion or 1.1 billion, and now a transaction happened at 1.5 billion, but the price has jumped to 2 billion, they can’t buy it. Right? They can’t buy it. So, in the field, the psychological factors reset the entire situation. It’s not about analyzing the circumstances before any factors occur; it’s just that everything is lined up perfectly. Here, since interest rates are rising, you’re going to buy, right?

You think you're going to sell it little by little, but that's a mistaken idea, right? So, what I do when I give lectures is this: imagine a cigarette in the wind. When the wind blows, it will move in the direction the wind is blowing, right? So, the logic we pursue in common sense, as you mentioned, is exactly this. The premise is that it’s a small pond, but let's say it's placed on a large river with a strong current flowing from left to right. Even if the cigarette is sitting still, it will be carried along by the flow of the river, right? But if the wind is blowing strongly in the opposite direction, how will the cigarette move? Oh, it won't just go with the flow. It will move according to the flow.

The flow is like this: the lecture, the flow of the lecture is stronger, right? The flow of the lecture is indeed stronger. The wind cannot overcome that flow of the lecture. So, when we analyze things now, we have a habit of omitting the surrounding situations and just analyzing with that one factor. Yes, that's right. So, when the wind blows, we think the flag will move according to the wind. However, we don't consider where the flag is placed at all. So, when interest rates decrease, it seems like a new era will come, but that's not the case at all. However, there are still some people who were hoping for a decrease in interest rates. Who are these people? In my opinion, the market in the metropolitan area is somewhat independent of the direction of interest rates.

There is a strong upward trend in the market, but in areas like the outskirts of the metropolitan area or in rural regions, it has been relatively quiet. I think people in those areas might be holding onto some hope that a decrease in interest rates could be a positive factor for them. What are your thoughts on this? 

Well, that's not really helpful. For instance, in Daegu, there are many unsold properties. For housing prices to rise, these unsold properties need to be sold. Let me explain the process of selling unsold properties. Customers come in; when interest rates go down, customers come in with expectations. They come in, listen to the explanations, and need to sign contracts. If, for example, ten people come in and all ten sign contracts, that would be great. However, if ten people come in and I see that they all have the same thought—what if I’m the only one who signs?—there's still a sense of unease because the market remains unstable.

What if I'm the only one using it? Why aren't they using it? So I find myself watching others instead of making my own decisions. But the psychology of buyers is such that it has to sell for the prices to rise, right? But if I'm the only one using it, then everything sells. So I have to see what others are doing. But everyone is watching each other; it's a game of perception. That person seems like they would use it but doesn't. This is a very intense perception game, and in the end, they leave without making a deal. Usually, only one person out of many ends up using it. It’s a bit sad. I wanted to convey a hopeful message, but, well, you mentioned the market situation earlier. Just because interest rates drop doesn’t mean prices will automatically rise; we need to look at the existing market conditions.

Returning to the metropolitan area market, the U.S. has lowered interest rates, so I think it's likely that the Bank of Korea will do the same soon, whether it's next month or later. At some point, interest rates will be lowered. However, the metropolitan area is currently suffering from a supply shortage, especially in Seoul. I think this situation is a bit contradictory; with the supply shortage acting as a factor for price increases, and now interest rates are dropping. I suddenly thought, What should we do about this? What do you think about that? First of all, we need to consider the issue of supply shortage. People often refer to it as a supply shortage based on the outcomes observed, but there could be situations where it is not actually a supply shortage.

There is demand, right? It's about demand and supply. But if the demand is for one unit and the supply was one unit but then it decreased to two units, what situation does this create? In this case, the price is bound to rise, right? This leads to a supply shortage. Now, let's say the supply is one unit but the demand has increased to twenty units. What does this mean? The supply is one unit, but the demand is twenty units. This is also not a supply shortage. No, it's excess demand. Oh, are you saying not to look at it only from the supply perspective? The key factor here is how to address the issue. So, when demand increases, the focus should be on reducing demand rather than increasing supply. However, for instance, the increase in demand could be temporary, right? That's true, it could be due to other factors, so now...

When analyzing, if demand increases from 10 to 20 and this situation is expected to continue at 20, we can see it as a supply shortage. However, if the increase in demand to 20 is only temporary, then it may result in a perceived supply shortage. The problem arises when we assume that demand is fixed at 20 and consider it a supply shortage, leading us to increase supply to 20. But if demand later drops to 10, what happens? Then we have excess supply, and the market collapses. Therefore, strategies must always be based on what is primarily driving the change. I am confident that it is not a supply shortage; rather, I believe that demand has increased, but this increase is not permanent, and it is only temporary. This was particularly evident right before 2022.

For example, if we look at the years 2022 and 2023, the market didn't move, right? So, during this time, is it a supply shortage, stability, or excess supply? Should we consider it stable? It seems to be in a state of excess supply since the supply has decreased, right? The supply is indeed greater. Supply doesn't fluctuate significantly over the years; it doesn't change dramatically. However, if we look at demand and trading volume, we can understand it clearly. In 2022, the trading volume was less than 1,000 transactions, but now it has increased to around 8,000 transactions. The increase in trading volume indicates that transactions have occurred more frequently. We need to analyze whether this increase in transactions is due to a rise in demand or an increase in supply that has led to more transactions. To do this, we need to examine the supply in 2022.

You can see how much the supply was. However, the supply hasn't changed significantly. But this time, it seems that it is unusually better. They say the supply will be better in the near future. So now, they keep saying, This time, this time, and so on. Right? Is that so? They don't mention any changes in demand at all. No one talks about demand. But if you look at Seoul, it is always a place where demand exceeds supply. Then, demand shouldn't drop in Seoul in 2022. We need to continuously check whether there are contradictions in this logic. If demand in Seoul exceeds supply, it absolutely should not drop. It must not drop at all. Demand continues to exceed supply, and supply is lacking in Seoul. Therefore, Seoul must never...

We must not fall behind. However, considering that there has always been a cycle in Seoul, thinking solely based on supply is not enough. The demand is what moves. We need to look at demand as well; it increases and decreases. I see. I think I’ve been thinking based on supply too, as there have been many articles inciting fear, claiming that an unprecedented supply cliff is approaching. There have been a lot of these claims, and when combined with interest rate cuts, I have wondered if we might see another huge bull market in the future. However, such a situation will not occur. It will not happen because there is currently high demand, which results in what appears to be a supply shortage. We just need to consider whether this demand is temporary or permanent. Demand is always temporary; I mean, we don’t have real demand, do we?

What happens is that in our country, demand increases when prices are expected to rise, and it decreases when prices are not expected to rise. So, demand is always variable, and we need to keep this in mind when formulating policies or conducting market analyses. However, no one, including myself, really talks about demand in such a variable manner. The common narrative is that demand is always high in Seoul because it is a desirable place to live. Discussions about demand usually stop there. When I try to determine what the exact demand is, I find that demand is not visible. It seems really difficult to assess. From an expert's perspective, it's hard to talk about demand. On the other hand, supply is easier because it can be quantified. So, we usually discuss supply. I understand that demand is variable, and that idea seems to stick with me. Alright, today we will discuss the relationship between interest rates and our real estate market.

I have discussed this a bit. To summarize the director's opinion, the impact of interest rates on the real estate market is minimal. We need to consider other factors and the existing conditions of the market. That would be a good way to sum it up. Today, we talked about interest rates and the real estate market. We will return next time with more valuable insights. Thank you all! Thank you! Thank you!

때가 왔다, 금리 인하의 때. 더 상승할 가능성 있을까? '금리 인하 → 부동산 상승' 공식의 진실

부동산에 대한 객관적인 시각, 정확한 이론으로 시장을 분석하고 현상을 설명합니다.

아파트 사이클 연구소 소장 이현철입니다.
아파트는 필수품이면서 투자상품입니다
주식이나 암호화폐등 전형적인 투자상품은 관심이 없는 사람은
끝까지 관심을 갖지 않아도 되고 관심이 없을수도 있습니다.
그래서 분위기가 과열될때에도 분위기에 휩쓸리지 않을수도 있게 되는 것이죠.

그런데 주택은 다릅니다. 피할수 없습니다.
매일 매일 접하면서 살아야 합니다. 그래서 주택시장이 과열되면
그동안 관심을 가지지 않아도 될것 같다가 어쩔수 없이 과열된 시장에
반 강제적으로 참여하게 됩니다. 

그래서 부동산 공부가 필요합니다.
[피하지 못할거면 즐겨라] 라는 말이 있습니다.
부동산은 피할수 없습니다. 관심을 갖지 않고 살다가 반드시
후회하는 상황을 맞닥뜨리게 됩니다.
그럴거면 공부를 해서 내가 시장을 응용하고 잘 대응할수 있게
만드는게 낫지 않을까 생각합니다.

그 과정에서 제가 조금이나마 도움이 되었으면 합니다
부동산에 대한 객관적인 시각으로
부동산에 대한 좀더 정확한 이론으로
시장을 분석하고 현상을 설명하고자 합니다

많은 관심과 참여 바랍니다

- 비즈니스 협업 문의 : hoktal1@us-all.co.kr

때가 왔다, 금리 인하의 때. 더 상승할 가능성 있을까? '금리 인하 → 부동산 상승' 공식의 진실

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