In some areas of Seoul, it is said that housing prices have already recovered by 95% compared to the previous peak. Initially, there are talks about increasing trading volume, then rising jeonse prices, and naturally leading to an increase in transaction prices. Professor, how do you see the return of the bull market? How do you view this as a long-term trend? There are long-term trends and short-term cycles. Real estate, in the long run, tends to stabilize rather than constantly rise. This is theoretically correct, and it has been proven through various empirical experiences. However, it does not move in a straight line, so there are cycles, and even though there is a slight rebound this time as well, it doesn't mean the trend has changed. It's like saying it's already winter, but there are still warm and cold days, and suddenly it's said that spring has come just because it got a little warmer.

If you do it like this, you might freeze to death. I think that way. Initially, well, the highest price in Seoul, based on Gangnam, has tripled since 2017. The peak was around June or July 2022. Since then, people couldn't bear the high-end situation, so they started putting their houses on the market, causing the house prices to drop by about 20%. So, from early last year 2023, the current government started a money injection operation. They released about 40 trillion won. Not only that, even though interest rates have already been raised in Korea, they say they will lower the rates and keep encouraging more loans. There were policy pressures like that. Moreover, not only the 30-year maturity, but also up to 50 years for housing mortgage loans.

Do it like this, continuously encouraging people to buy houses, even borrowing money to buy houses. By doing this, the actual housing prices have increased. With this increase, the economy started to revive in the first half of last year. It was expected to continue, but all 40 trillion won was spent, causing a decline again from the second half. As it dropped, concerns about low birth rates resurfaced, and in front of the new government's policies, it seemed like a solution to the low birth rate problem, making people think that a lot of money is being spent, about 27 trillion won at the moment. What this means is that last year, 40 trillion won flowed into the entire housing market, causing prices to rise. Therefore, currently, mortgage loans for houses are increasing.

Over the past two months, a whopping 90 trillion won has increased. Just looking at the top five banks, it's unbelievable due to such unreasonable real estate support policies. Young people who don't even know anything are getting into debt to buy houses. So, what's the point of lowering interest rates on loans? If you do that, house prices will drop even more. Who will take responsibility later? There are several problems. If house prices keep rising, about 75% of personal assets are all tied up in real estate. As a result, more and more investments are being poured into real estate, and corporate debt has exceeded 100% of GDP, the highest level in the world as we generally know it. In fact, only in Korea, there is something like key money for lease contracts, which exceeds 1,000 trillion won. If you include that, it's about 150% of GDP. Also, only in Korea, truly

Uniquely, many self-employed people don't get corporate loans; they mostly get store loans, which amount to about 1100 trillion won. When you include that, it reaches about 200% of the GDP. If this doesn't burst, it's really strange. In my opinion, we need to somehow deflate this situation. Instead of deflating it, the bubble keeps getting bigger, and eventually, people can't get married because the housing prices are too high. There's no place to live, so how can they get married and have children? It doesn't make sense. That's why, in my view, the first priority is real estate. As housing prices keep soaring, on one side, they talk about low birth rates and come up with measures, but instead of controlling housing prices, if they just release a flood of new loans with a 27% debt-to-income ratio, and inflate housing prices like that, will people really think, Oh, we should get married and have more children?

No, raising housing prices again, oh, because housing prices are expensive, they can't get married again, oh, they can't even have children. That's what it is. Really, so using such policies is not right. Not only that, in Korea, we have various resources that cannot be used up just by consuming. Instead, they should be used for investment. Looking at investment, people misunderstand that in Korea, investment accounts for about 32% of GDP. This percentage is quite high. However, within that, about half of it is construction investment, real estate investment, and the rest is facility investment and R&D investment. The world is changing rapidly, moving into the digital world, developing new advanced technologies. We need to adjust our industrial structure in that direction. But if we keep building only houses, then the policy is just trying to keep raising housing prices.

When you write, even you are completely absorbed, and our country's limited resources are all going in that direction, and among them, the investment in creating future food resources is not being properly made, which is a really big problem. Recently, anyway, looking at the trading amount of transactions, it is true that housing prices are rising. However, the professor says that it is correct that it will stabilize downward now. Is there a reason for that? First of all, all goods and services have demand and supply. Then, let's think about a product called real estate, which is a house. Let's think about what the demand and supply for that house are. First, let's think about demand. In what cases does demand go up? Of course, houses are limited, and suddenly the population continues to increase rapidly.

Looking at the population composition, the young adults who absolutely need a lot of houses, so we usually talk about the working-age population from 15 to 64 years old. If the population increases absolutely and the proportion also increases significantly, then the housing prices can rise. Since the early 1960s when we had rapid economic growth until the mid-2000s, the population has almost doubled. In the 1960s, the population in Korea was 25 million, then recently it rose to about 51.5 million, and recently it's around 50 million. So, it almost doubled, with a significant increase in the young population, many of whom moved from rural areas to Seoul. So, how can we build houses quickly? That's why housing prices went up rapidly.

We used to have growth. At one point, we experienced a growth of 14%. However, recently, the growth rate has been declining. Last year, it was 1.4%, and this year, it is projected to be around 2.1%. Some even say it could reach 2.5%. Overall, there have been sudden improvements in exports. However, internally, we see various signs indicating a continuous decrease in growth potential. Currently, it is estimated to be around 2.0%. According to the Bank of Korea, in about 30 years, it could drop below 1% in the next 10 years, and in 40 years, it could reach 0% or even lower. In 50 years, there might be no growth at all. Moreover, household income has already turned negative, as reported. If the population doesn't increase and incomes don't rise, who will be able to buy houses? One might think this way, so it doesn't make sense.

So, why did housing prices rise? You could say that all this time. Even so, the population has been increasing recently, and income is gradually growing. The potential is continuously decreasing. Why is that? In my opinion, since 2017, even if I made mistakes in real estate policies, I made too many mistakes. Not only policy failures, but suddenly in 2020, due to the COVID situation, the economy suddenly plunged into a complete recession. So, a lot of money was poured in. Not only in our country, but globally, we are facing such a situation. As a result, liquidity has been greatly increased. In other words, interest rates have dropped even more, so people have nothing to do with it, so they invest in stocks. Because they are stuck at home and cannot go out for other activities, they invest in that direction, all their assets.

Money has all gone to the market, so prices have risen a lot. Now, let's think about it. Will it continue like this? First of all, the population, especially the elderly population, who are actively demanding housing, is decreasing. Moreover, not only that, but the economic growth potential remains at 0%, and interest rates are already very high. So, will the interest rates drop in the future? I don't think they will drop. In my opinion, interest rates will not continue to decrease, and even if they do, they will not decrease as low as before. Then, how can the housing prices rise again? It's impossible for them to rise. From the demand side, now let's consider the supply side. Even though people keep saying we should keep building houses, recently, due to various reasons, there hasn't been enough new housing supply.

Later, I found out that there were also some statistical errors, like 170,000 won, right? It's amazing that facts like this were omitted. Besides that, there are currently about 86,000 housing units for sale in Seoul. This is the largest number ever. What does it mean that so many are coming out? Actually, when considering the supply cycle, it's generally thought that the number of new housing units is always the focus. However, in reality, the supply of existing homes is more crucial. The supply of existing homes is currently at its highest in the world. To put it another way, demand has decreased as expected, while the supply has increased significantly. However, prices are not dropping. Why is that? Since last year, I have been forcibly supporting it, so this has now become a problem.

So, every time this story comes out, I get excited, but as time passes, the government raises prices too much, causing many people to suffer and endure hardships, so they change the administration. So, in this information, they try to somehow support that without letting it fall, using policies to prevent it. This is truly a policy for the people. Construction companies are not really trying to survive. I can't believe this is possible. From the beginning, I shouldn't keep getting excited, but because they implement such unreasonable policies, that's why the government forcibly supports it, making it look like it has increased. How is that possible? Then, in the future, we will continue to do our DSR. Normally, we shouldn't borrow money, but based on the ability to repay, we only borrow up to a certain amount. This is internationally accepted.

I recommend that even our country has adopted it, but still now, in the special interior, the next special interior, borrowing loans with special loans, and constantly bypassing the DSR, borrowing money. If you keep using policies that are not even allowed to use the DSR, young people keep borrowing money and buying houses, it's like a time bomb. Who will take responsibility later? I keep saying, then the politicians who made that policy, the officials of our government who made it, should take responsibility. If they keep using such unreasonable policies, if I'm wrong, please call me and let's overturn it together. Using such unreasonable policies is making it difficult for our people and destroying our country's economy. Please don't do this. When we look at the real estate market, let's stabilize the housing prices going forward.

I believe that it is inevitable for him to draw a cycle based on that. Drawing a cycle now is not natural, but rather forced by the government's support. Therefore, in the first half of last year, it briefly revived, and in the second half, it collapsed again after using up 40 trillion won in special relief funds. Now, they are injecting another 27 trillion won, so the situation is rising again. As we move into the second half, there will be policies such as increasing various housing supply measures, which will lead to stress. It is really difficult to say that the trend has changed like this. Saying it is difficult is an understatement and unreasonable, I think. Also, we need to keep an eye on the trend of the monthly rent, Professor.

It has been rising for 54 consecutive weeks. With the rent continuing to rise like this, there are discussions about whether the housing prices have hit rock bottom. How do you view this situation? First of all, when you think about why the rent is rising, it's not that the rent is rising for all homes. In the case of villas or townhouses, on the contrary, they are decreasing. Since people are not moving in, the previous tenants there keep moving to apartments, increasing the demand for apartments. This situation is a very important cause of government policy failures. Another thing is, from the perspective of the property owner who rents out the apartment, if you give out the rent once every four years, there is a greater possibility that the house prices will drop in the future. It could be due to demographic structure, income, various future prospects, or interest rates.

When you look at this kind of situation, many people may think that housing prices will not rise. Even if I don't say this, I'm just summarizing and telling you, but in that situation, if you just give away the jeonse for four years for no reason, you can't sell it in the middle, so you're stuck. I think this is a major factor, so I think there might be a bit of an increase. That's why I think it's not pushing up the house prices right now, but rather it seems like the house prices will go up, so it's not the jeonse prices going up, but the house prices going down. So, from the tenant's perspective, they are just looking into jeonse. However, if the jeonse is almost the same as the house price, there isn't much difference. Then, in fact, you might think, Wouldn't it be better to just buy?

If you listen, then naturally, the rise in housing prices could also happen a little like this. So, in those cases, in the past, people used to say that if the jeonse prices go up, the housing prices go up too. When there is a lot of potential demand to buy houses, that's when the population is rapidly increasing, the economic growth is accelerating, and the interest rates are low. So, the conditions have all changed now. This is like, in many regions in Korea, when you look at apartments, there is almost no difference between the selling price and the jeonse price. Why is that? It's because the jeonse prices keep going up, so people don't want to buy those houses. Therefore, the selling prices go up. So, even in Seoul, it's going in that direction now. This is continuously jeonse.

Prices will be pushed up a lot. It won't happen like that. For that to happen, the population of our country would have to suddenly start increasing again, and the economy would have to grow tremendously, and the government would have to completely give out special loans, not 40 trillion or 27 trillion won, but multiplied by 10, just like that. If they inject it like that, it could happen, I don't know. So, recently, construction costs and housing prices are rising sharply, which could create a domino effect on housing prices. There are also talks like this. If I mention it again, when we talk about supply and demand, the cost of supply goes up a bit. If demand doesn't rise, even if the supply price goes up, the price of the product cannot go up. If there is no demand, how can the supply price go up? It's impossible. Of course, when people

Because people prefer existing homes, the prices of new homes may rise slightly. However, with a huge supply of old houses overall, how could that raise housing prices? Demand is already low, and supply keeps increasing. Therefore, simply saying that the construction costs of new houses have risen cannot justify raising housing prices. Moreover, if you look into it, for example, consider how much construction costs have increased. Think about how much it costs per pyeong in Seoul. Let's say it's 10 million won. If it's 10 million won, for a 30 pyeong house, it's 300 million won, right? If it increased by 50%, how much would it be? It would only increase by 150 million won, not much. What I'm saying is, how much are houses actually sold for?

It's not like Seoul apartments are suddenly becoming 20 or 30 billion won. Even in Gangnam, it's not like they cost 1.5 billion won. But it seems like because of that, they are drastically increasing the presale prices. What is this all about? Construction costs in Seoul and in the provinces, suddenly the construction costs skyrocket. In the provinces, it's cheaper. Moreover, recently, the price of steel bars has dropped significantly. Yet, there is no demand for construction now. How can construction costs keep rising? But they say it's sold out. Professor, when they create this kind of atmosphere, if you don't buy, it's like you're a fool.

I'm in big trouble this time. By doing this, it means that people won't go in. So, the role of the government is to prevent such things from happening. However, the government is still determined and keeps trying to raise housing prices, which is causing even bigger problems. I really feel heartbroken that we are passing on this bomb to the young generation who should be responsible for our future, getting married, having children, and taking care of our future. It's really too much to pass on another bomb to the young generation. I can't believe this is happening. However, high housing prices may not simply lead to an increase in apartment prices, but may also cause delays in construction, which in turn may lead to a shortage of supply. There are also discussions about this. What do you think about this part? I think it's unreasonable, but the economy is...

If they like it, construction companies and developers will somehow build houses. Since the economy is not doing well and it seems like they won't sell, they're not building houses. It's not because construction costs are rising, so honestly, even though construction costs keep going up, if they try to sell them, they won't sell. New housing supply keeps decreasing, so some people say that housing prices are going up. However, it's not that housing prices will go up in the future. So, if they put them on the market at the current presale price, they probably won't sell well, so they are not building new houses. There is new housing supply and existing apartments for sale. Currently, 8,000 units are available, but how can they say that new housing supply has slightly decreased?

Should we raise housing prices? If this just goes on without any measures taken, we need to know what kind of risks could arise. We should be aware of that. Personally, I think the market should be left alone. Continuously implementing market-friendly policies, such as deregulation, even talking about abolishing or reducing comprehensive real estate taxes, that's market-friendly. Not interfering is the way to go. However, currently, there are various bankruptcies happening in construction PF, so it seems like the market will shake greatly. Naturally, companies that should exit will exit. From there, those companies will have various real estate assets that have been stopped, starting with pigs, and if these are cheaply released to the market, someone will...

Other companies will buy cheaply and sell at a low price, and naturally, the market will stabilize. Only competitive companies will remain. The policy of trying to save all companies is not market-friendly but rather interferes with and disrupts the market. I want to say this. If the government intervenes, it might be better to just leave it alone, and things might settle naturally. If there is continuous intervention, it will likely lead to a worse outcome. The current policy is intervention policy. To say it again, they mentioned 40 trillion won, and this time, they will provide special loans of 27 trillion won. Besides that, they will adjust the construction support fund. The government is actively intervening, trying to save almost everything. Well, those companies...

How much money has been spent, and on top of that, the policy of the government that keeps bailing out financial institutions entangled with savings banks, securities firms, and the like needs to be questioned. Structural adjustments need to happen so that when a typhoon comes, although it may be tough at first, it will eventually lead to purification. Just like a river may seem murky at first, causing difficulties for some, ultimately it is necessary to revive the ecosystem of that river. That's how it should be done. If we don't let go and keep holding on, turning the bomb around, eventually when it explodes even bigger, who will take responsibility for that? In the end, the burden will fall on the young people who will be hit by that final bomb. It will all come back to haunt those young people. That's the real deal.

I'm not usually worried. The bubble has already grown, and even if it bursts right now, it wouldn't be strange at all. But continuing to inflate it like this, I think it doesn't make sense. I really think so. But why does this kind of repetition happen? When professors talk about stabilizing housing prices, that stabilization doesn't mean they won't rise. Why does this repetition occur? Stabilization doesn't mean hoping for housing prices to keep falling. It means it would be good to just maintain the current level. In my view, this stabilization should go down, but it just means maintaining the current level. What is the current level? As I mentioned earlier, it has already tripled, slightly dropped from the peak, and almost fully recovered again. In this state, how expensive are the housing prices compared to the incomes in developed countries?

It's like this. In some ways, when you look at it, in Korea, like Seoul, if you compare it to New York, the housing prices are the same. No, even though the income level in the United States is two to two and a half times higher than in Korea, that's why the housing prices are two to two and a half times higher. So, the ratio of housing prices to income is about 10 there. So, if you save up an average person's income for about 10 years, then you can buy a house. In Korea, it takes about 25 years. Think about it once. If we look at Seoul as a standard, I think the average housing price is around 1 to 1.2 billion won. So, how much is the income of an average household? Even if we generously estimate the annual income to be 50 million won, in order to buy a 1 billion won apartment, it would take 20 years. If I talk about this, some people come to the comments and say, Oh, if you go to the countryside, you can find cheaper houses again.

Why do you keep comparing expensive houses in Seoul like that? You keep saying that jobs are all in Seoul, so people naturally have to gather in Seoul and compare. Obviously, young people cannot start living in rural areas right away, commuting back and forth for hours each day. It doesn't make sense. Naturally, they should compare houses with job opportunities. I am stating my position like this, and as an economist, I am expressing my opinion without selling my conscience. I emphasized once again that this is the long-term trend. Furthermore, we should diversify our general assets into a portfolio. If we invest almost all of our assets in one place, what will we do later on?

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