Once we enter a downturn, it typically tends to last for at least about five years. In 2022, we saw declines over three, four, five, and even six years. Therefore, it is expected that the downturn could last until around seven years. There have been many discussions about how apartment prices in Seoul, the metropolitan area, and across the country have dropped significantly, reaching one of the largest declines in history. So, what is the current market situation? I believe we have now officially entered a significant downturn, and it seems to be progressing much faster than I had anticipated. Originally, last year, I thought that starting from the second half of this year, we would begin to see a decline. I expected that the policies would stabilize until about this year, but the downturn is happening more quickly than expected, and the reason for this, as you all know, is the current interest rate hikes.

The speed of interest rate hikes is so strong and rapid that it is impossible not to be affected by it. Therefore, I think the real estate market is progressing quite steeply. Along with the interest rate hikes, we are also seeing a ripple effect, such as the Legoland incident and more recently, the Heungkuk Life incident. In a normal market, incidents like Legoland would not typically cause a significant impact. After all, Legoland is a special project and a local government initiative. Even if such a project collapses, it would have been considered a separate situation. It shouldn't have spread to the overall situation in our country. However, due to the strong interest rate hikes, the foundation has weakened. In this weakened financial situation, we now have the Legoland issue.

As the situation has escalated, it is generally expanding. Originally, Legoland was facing a loss of 200 million, but to prevent this, 200 trillion is now being injected. This expansion is also affecting the real estate sector. Since you have been on-site for a long time, have there been instances in the past where interest rates rose as quickly as they are now? No, there haven’t been. The current pace is comparable to the IMF crisis; you could say it’s almost at that level. If we look at the most recent shock, it would be the 2008 financial crisis. That was also a significant downturn, but the rate of interest hikes now is much faster than it was back then. Many people express that the decline in real estate during that time coincided with the IMF crisis and was due to external shocks.

Right now, it seems that the interest rate hike is progressing steeply, almost by chance, and along with that, the market has officially entered a downward trend that coincides with this period. I think that after some time, there will be quite a few people saying that the market fell due to the interest rate hikes. However, if we look at the sequence of events, the market first entered a stagnation phase before the interest rate hikes began. The market had already started to decline, and then the interest rates were raised at a very rapid pace, which only fueled the decline further, leading to a more drastic drop. I always emphasize that interest rates are a secondary factor. In the case of secondary factors, if their direction aligns with the market, they can have a tremendous impact, almost like pouring gasoline on a fire. However, if their direction is opposite, they hardly have any effect.

So, in this case, the market has declined first, and the direction of interest rate hikes has completely aligned with the market. As a result, we are currently in a situation where the market is in a downturn, and it's like pouring gasoline on a fire. The fire of decline is blazing intensely right now. Given that, the fire that is burning fiercely now is unlikely to extinguish easily next year. What do you think will happen to the real estate market situation next year? It's hard to expect that the situation will improve next year. Since the rental prices are also declining, I anticipate that the felt decline will be significant. This atmosphere is difficult to dissipate quickly. In fact, I am not a financial expert, so I can't make an accurate diagnosis about when the interest rate hikes will stop, but I do keep listening to what financial experts are saying.

If you listen closely, there were discussions earlier this year suggesting that the interest rate hikes would be finished by mid-year. However, now there are many talks indicating that the trend of interest rate increases will continue into the second half of the year. It seems that the market will likely align with this trend of interest rate hikes next year, making a rebound difficult. Of course, there is the variable of policy. Up until now, I have expressed that the government has a good understanding of the market and is responding appropriately. However, if they feel too much urgency about the crisis, they might lift regulations too quickly and forcefully. In that case, we could see some slight rebounds. Therefore, it might be worth paying attention to how the government implements its policies during this time, especially in such circumstances.

You mentioned that we have entered a full-fledged downturn. If next year is also looking bad, how long can this decline continue? Many people have a short-term perspective, but the real estate market is one that reflects collective public sentiment. Once public sentiment aligns in one direction, it's difficult to change that direction. Therefore, when we officially enter a downturn, it usually lasts about five years. From 2022, we could see a decline extending to 2023, 2024, 2025, 2026, and 2027, so we might experience a downturn lasting around seven years. After that, it's not an immediate rebound; it typically goes through a U-shaped recovery, which means we will go through a policy adjustment period. This stabilization phase usually lasts about one to two years. If we add that to the downturn period, it could extend the total duration of the decline to about seven to eight years. Thus, I suggest that around 2030, it would be a good time to approach the market from a buying perspective.

People are saying that by 2030, prices will decline, but that's not necessarily the case. The bottom is expected to be around 2027. It's not going to be a quick rebound; rather, it will be a sideways movement for a while. After that, we anticipate a serious attempt at rising prices around 2030. This is because there’s still a desire to buy at lower prices, and I also think that 2030 could be the optimal timing. To buy cheaply, 2027 or 2028 would be the right time. There might be some increases, but the reason I don't recommend buying during that time is that it's tough to endure periods of stagnation. When people buy and the prices don’t go up, it creates a lot of anxiety, which leads to selling. I prefer to wait until there’s a clear upward trend before investing.

Many people are mistaken in thinking that when the trading price goes up, it's because someone is buying, which is usually the norm. However, in a market composed solely of individual investors, it's not easy for the price to rise just because someone buys. For example, if it seems like the price isn't going to rise and I buy in first, later, if the price drops a bit or doesn't go up, I might feel envious of someone who buys after me. This leads to a situation where everyone is hesitant and ends up buying less. Individual investors always feel like they incur losses when they enter the market first, which creates a kind of cautious strategy among them. They often feel pressured to let others go first, making it difficult for them to drive prices up through their purchases. For instance, in a declining market...

Attempts at collusion are being made. Do you think it will become collusion? Absolutely not. It absolutely cannot happen. So, when we talk about collusion, it's similar to the theory of saying, Let's collude and raise prices. But it just doesn't work. It's not possible for collusion to happen, which means prices don't rise. The most challenging aspect I encountered while studying the real estate market was this part. When it turns at the bottom, I clearly had this logic at that time. I thought, Someone must buy for prices to go up. How can prices rise if no one is buying? So, I was watching to see who would buy. I observed the declining market firsthand, wondering who was buying. But there were no forces at play. There were only sporadic buyers, and when you approach the sellers, the listings just remain. As a result, prices don't go up. There are many unsold properties as well.

I really wonder why it keeps going up. If it continues like this, it might not go up at all. In fact, there are occasional news reports from the media about transactions that are not increasing, which made me think it really might not go up. But after some time, I noticed that the asking prices were rising, and the transaction prices were also increasing, creating such a situation. It's hard to understand why it goes up when no transactions are happening; many incomprehensible situations occurred. So, as I focused on studying this, I later discovered that it was being pushed up by the jeonse prices. Therefore, to turn around in a declining market, it's not just about jeonse; how does jeonse come about? In a declining market, if investors do not invest for a long time, the supply decreases. The supply of jeonse and rentals decreases, and simply reducing the rental supply does not...

The increase in jeonse prices is not happening. As the supply of rentals decreases, there are still existing investors. However, if the number of these investors does not decrease, one might wonder how much the supply will actually drop. This is where the transition from jeonse to monthly rent occurs. In a declining market, those who set up jeonse arrangements will only incur losses. However, those who set up monthly rent can mitigate their losses. This is because, typically, the rent they receive is higher than the interest they pay. 

But many people might find this hard to understand in the current situation, as interest rates are high. This is a special circumstance. Under normal conditions, monthly rent always exceeds interest payments. Therefore, the current situation, where monthly rent is temporarily lower than interest rates, is an unusual scenario due to the rapid increase in interest rates.

In the case of monthly rent, contracts are made on an annual basis, so it is not possible to change the terms midway. However, interest rates are not fixed for a year; they change frequently, which means we cannot keep up with them. After some time, monthly rents tend to increase again. When interest rate hikes stop, a situation arises where monthly rents increase even more. People who have set their rents are receiving monthly payments to cover their interest and are left with some profit, which helps reduce their losses. Investors are attempting this strategy frequently. Consequently, the supply of jeonse (long-term lease) decreases in the market. News reports then mention that jeonse is disappearing because the supply is rapidly declining. Additionally, with the purchasing sentiment dampened due to losses, jeonse investors also start to sell. This is the current situation, and then the demand side...

Originally, those who owned homes are now trying to become tenants. So, they are putting their current homes on the market and going around looking for rental properties. In doing so, the demand for rentals increases. This creates a market environment where a rental crisis can develop. Typically, it takes more than four years for this situation to build up to the point where a crisis occurs. A crisis doesn’t just suddenly appear within two years. There always needs to be a buildup in the market for such a crisis to occur. This buildup process cannot happen in just one or two years; it takes a long time to develop the conditions for a crisis. Then, there are unsold properties. The trend of unsold properties has been continuously increasing, and many people, including experts, are unaware of this situation.

I don't know much about unsold units because I've never seen a distribution market. Very few people properly understand the impact of unsold units on the market, how they accumulate, and why they accumulate. Basically, if there are unsold units, it means that the distribution hasn't happened. When buying sentiment declines, unsold units will inevitably accumulate. As unsold units pile up, buying sentiment worsens. However, many people mistakenly think that when the market declines, construction companies will stop selling because unsold units are appearing. But that doesn't happen right away. There is a time lag; it takes about two to three years after a decline for the number of distributions to start decreasing. This is because distribution plans are not made overnight. The current distributions were planned at least two to three years ago.

We need to continue pushing steadily in order to be able to sell now. Then, looking ahead to the scheduled sales volumes in two or three years, we won't give up on those. Even if there are unsold units, we will just keep going. And it's rare for all 1,000 units to remain unsold when, for example, 1,000 units are being sold. Usually, some 500 units will sell, and then there will be 500 unsold units left. In this case, the construction company has already sold 500 units, so they can proceed with construction and secure funding, allowing various processes to continue. Therefore, there is no urgent need to react quickly just because there are unsold units. The point at which unsold units start to decrease will be around three to four years later, at which time they will no longer be selling unsold units.

From that point on, the number of unsold units started to gradually decrease. The unsold units need to decrease to a certain extent before we can see a rise. If the unsold units are at a peak, there can't be any increase. The period during which the unsold units accumulate to their highest point lasts about two to three years during a decline. After that, the period of gradual decrease takes another two to three years. If we add this up, it indicates a period of at least five years. Currently, regarding the scale of unsold units, in the case of the metropolitan area, the figures for September have just been released, and they are indeed increasing exponentially. For example, in Seoul, there aren't many unsold units right now because there aren't many units available for sale. However, looking at Gyeonggi Province, the number of unsold units increased to 5,553 in September. This represents an increase of about 75% in just one month. The rate of increase in unsold units is quite significant.

Things are progressing rapidly right now. In Daegu, the number of unsold units has already surpassed 10,000. The increase in unsold units is happening at a very fast pace. In Gyeonggi Province, the highest number of unsold units in the past was around 38,000. Even when considering that figure, it's hard to tell if the current number is high or low compared to the past. The peak number was 38,000. In the metropolitan area, the number in Seoul was just over 4,000. Given this situation, we're at the beginning of a decline, but Gyeonggi Province has already exceeded 5,000 units, currently standing at over 5,500. If this trend continues rapidly, there is a possibility that by early next year, the number could surpass 10,000, and by the second half of next year, it could reach around 20,000. This rapid progression indicates that we could be approaching the peak figures of around 30,000 to 40,000 units.

There is a possibility. Currently, the scale is not that enormous, but it is increasing, and the speed of growth is quite rapid. The important point to consider here is that we should not focus solely on the numbers themselves. Many people make this mistake; for example, in the past, the peak was 38,000 cases, and if now there are only 3,000 cases, they might think it's nothing. However, this static analysis is meaningless because real estate always trends in a flowing manner. Right now, there are no unsold properties, but they have started to appear and are increasing. Therefore, the figure of 38,000 cases is something that must be passed through after going through the 3,000 cases. It doesn’t just stop at 3,000; it grows from there, increasing and increasing. So, it has now risen from 3,000 cases to 5,500 cases, and then...

Now, in the following month, we plan to increase the number to about 6,000 to 7,000 cases. This means that it is gradually increasing. This trend is considered risky.

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앞으로 5년 동안 집값이 하락하게 되는 이유 (이현철)

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