5 reasons why you shouldn’t buy a house right now

All the house prices these days are 1 billion won. In Dobong-gu, Seoul, the exclusive area of ​​84㎡ exceeded 1 billion won, and Samsong District in Goyang City and Giheung-gu in Yongin City also joined the 1 billion club. There are also 800 million won for sale in Yangju, Gyeonggi-do, so those who do not have a home have a feeling of relative deprivation or a feeling of’Should I buy it even now?’ So I prepared. How far the current house price has come. Let’s check the real estate change seen as an indicator.

There are leading indicators in the real estate market. Leading indicators are indicators that precede economic movement among various indicators that indicate economic trends. There are also many leading indicators in real estate. Transaction volume, actual transaction index, jeonse price, interest rate, Gangnam 4-gu house price, etc. Let’s see how these leading indicators are changing in recent years and examine the likelihood of falling house prices.

① In January, the volume of apartment sales in Seoul fell below 2000 cases.

First, let’s look at the trading volume. This is the volume of apartment sales in Seoul. If you look at, you can see that the trading volume has definitely declined in January this year. It has definitely dropped from 7464 in December to 1850 in January. The reporting period is 30 days, so it could be extended a little more, but there will be no reason for an unprecedented increase. The sales volume of apartments in Seoul in January decreased by 75% from the volume in December. Among the Gangnam area, Songpa-gu and Seocho-gu decreased significantly compared to the previous month. The same is true of the decline in Gyeonggi Province. From about 24,000 in delivery, in January, the number of cases decreased to 10,000.

The fact that the volume of apartment sales in Seoul has fallen below 2000 should be seen as a reason for giving an abnormal signal in the future. There has never been a time since March 2019, when the volume of transactions fell below 2000. At that time, it was influenced by the announcement of the 9/13 countermeasures, a high-strength countermeasure for comprehensive countermeasures such as the previous year’s main charge, jeonse loans, and tax. At this time, price adjustments and transaction volume declines could have continued, but rather, a balloon effect occurred due to frequent government measures. Except in 2019, there was once every year in 2012 and 2013, when the sales of apartments in Seoul fell to less than 2,000 cases, and the smallest house prices in Seoul were at their peak.

Why did the transaction volume drop so suddenly in January this year? There will be some countermeasures that have been poured out over the years, and there is also an impact on standby consumers caused by the anticipation of the’special supply measures’ that President Moon Jae-in said in person. Although effectiveness is a problem, anyway, the 2·4 housing supply plan was announced that it was groundbreaking. However, most of all, the reason for the decrease in transactions is that the impact of credit lending regulations is large. Since the banking sector is strongly regulating household loans, there are many smart people who use credit loans. However, in September of last year, the Financial Supervisory Service directly came up with a plan for managing credit loans.

In addition to the policy to reduce the limit for professionals and high-income people, in November, if the total amount of credit loans exceeded 100 million won, credit loans were recovered if a house was purchased in a regulated area within one year of receiving the loan. And the government also demands a rate hike. In September of last year, the interest rate on credit loans fell to 2.8%. The mortgage interest rate was 2.4% over the same period, but there was no significant difference between the mortgage interest rate and the credit rate. The rate of credit loans fell from 2.8% last year to 3.5% in December. In 2018, credit loans were around 4.5%.

Along with rising credit rates, mortgage interest rates are also rising. Interest rates, which dropped to 2.3% in August last year, rose to 2.6% in December last year. Although the benchmark interest rate has not changed, the market interest rate is rising. The rise in loan interest rates would inevitably be negative for the real estate market. It will not appear on the market right away, but it will be a burden for those who have already received a loan or who are trying to obtain a loan in the future.

② The rise of apartment sales prices in Seoul is slowing

Then let’s see what the rate of increase in apartment prices is. Seoul maintained 0.09% from last week. It has been steadily rising, but this week it showed the same rate. In particular, it is necessary to look at the growth rate of Gangnam 4-gu, which serves as a leading indicator of housing prices in Seoul. Excluding Gangnam-gu, Seocho, Songpa, and Gangdong showed less rise than Jeonju. In Gangnam-gu, the uptrend does not seem to decline as the Apgujeong-dong modern apartment reconstruction project gained momentum.

What about Gyeonggi-do? In Gyeonggi Province, the rate of increase has increased. Until September of last year, the rate of increase did not change significantly, but you can see that the rate of increase has increased considerably from October. Why does the rise increase? This is because Gyeonggi-do has the influence of buying a house in Gyeonggi-do with the increase in the rent for Seoul.

In a situation where even credit loans are blocked, I can’t even dream of getting my own home in Seoul, and the rent for rent continues to rise. In fact, the net inflow of population in the metropolitan area last year was the highest in 14 years since 2006, and 65% of the relocated people from Seoul moved to Gyeonggi-do. It seems that the rise of apartment prices in Gyeonggi-do can go a bit further with the rise of the jeonse and panic buying.

③Seoul apartment jeonse price rise is also slowing

Next, let’s look at the rate of increase in the total set value. The total price is a leading indicator of the trading market. Economically, the total price is the value in use of the house, while the sale value is the exchange value of the market. The leased value is reflected in consideration of the interest rate, etc. in addition to the Fundamental Value of the real estate. It means that the predecessor value is the prelude to the decline or rise in the trading value.

Also, as the total value increases, the utilization increases. It is a good market for reinvestment by using jeonse money, and for gap investment by living with jeonse. So, when the total price rises, the trading price also rises.

However, when I saw the increase rate of apartment rental prices in Seoul recently, what had risen sharply started to slow down little by little. In Seoul, the rise from 0.15% per week in November of last year has gradually slowed, and has decreased to 0.12% last week. It can be seen that the rise in the total price of the Gangnam area has slowed. Seocho rose 0.23% last September, but last week it was only 0.08%.

Let’s look at Gyeonggi-do and Incheon. In Incheon, the rise from 0.61% per week in November of last year is rapidly slowing. Last week, it was down to 0.29%. Incheon has risen too much for a while for reasons such as undervalued. Therefore, there is also a reason for the price resistance line. Gyeonggi-do is rather increasing its rise. It was up 0.27% last week from 0.25%. As I mentioned in the rate of increase in trading prices, Gyeonggi-do is inevitable as it has moved to Gyeonggi-do, unable to withstand the jeonse and trading prices of Seoul.

④ Gangnam area high-priced apartments for sale are piled up

We should also look at the actual transaction price. Let’s start with the most market-sensitive reconstruction. Daechi-dong Eunma apartment has not been traded in January. There were a lot of deals in December of last year. The exclusive area of ​​84.43m2 was traded at 2.35 billion won on December 5th last year, but on the 30th it was sold at a price of 2.28 billion won. The sale is listed up to 2.5 billion won. There are a lot of products for sale, but because they keep raising the quotes, they cannot trade.

Jamsil Jugong Complex 5 had quite a lot of transactions in January. Looking at the actual transaction price, 82.51㎡ of exclusive area was traded at 2,481 billion won on January 9th, down slightly to 2.3 billion won on the 20th. 82.61m² was traded at 2,481 billion won, but recently, the deal came out at 2.41 billion won, a little down. Jamsil Jugong Complex 5 also has a lot of products for sale at the moment, with asking prices up to KRW 2.7 billion.

The new apartment, Banpo-dong Acro River Park, had only two transactions in January. 84.98㎡ was traded at 3.3 billion won on the 2nd. In December of last year, it was traded at 3.38 billion won. The sales range from 3.2 billion to 3.9 billion. Acro River Park has a lot of difference in price depending on the view of the Han River. Anyway, it is important to note that there are a lot of items for sale at Acro River Park.

⑤ The five-year rule of the auction successful bid price… 6th year this year

The auction market also serves as a leading indicator of the apartment market. The fact that a lot of auction items are coming out soon translates to a downturn. The auction market is hot these days. Last year, the apartment bid price rate exceeded 95%. However, the auction market recently had a big variable. It is the new coronavirus infection situation. Because of this, there were many things that the auction could not proceed. So, once the auction market is opened, the winning bid rate will increase tremendously.

There is something called the’five-year rule’. The high selling price doesn’t last until 6 years. When looking at the successful bid price rate for apartments in Gangnam-gu, the successful bid price rate for apartments in Gangnam-gu was trendingly higher than 90%, excluding 2004 for 5 years from 2002 to 2006. Since 2007, the successful bid price has declined to around 80%. Then, since 2015, the successful bid rate has been around 90% for 5 consecutive years. This year is the 6th year. It looks somewhat overheated.

Today, we looked at how the current market is changing through indicators that act as leading indicators of house prices. There are many more variables, such as abundant liquidity, so the market may not go as the indicators show, but you can see that the market in January of this year is different from the past. In the future, depending on how much the government’s supply measures will be accelerated, or what additional plans to come up, I think the market will change even more.

<한경닷컴 The Moneyist> Jiyoung Yang Director of R&C Research Center
<독자 문의 : [email protected]>