2023-09-19 12:58:00
As the rise in house prices spreads across the country, the government’s real estate policy announcement is expected to draw public attention. The gist of what will be included this time is expected to be measures to ensure a stable housing supply. This is because concerns have increased that housing supply indicators, which have been rapidly shrinking since the second half of last year, will serve as fuel for a rise in housing prices in the next two to three years. According to the Ministry of Land, Infrastructure and Transport, the number of housing permits as of July this year was 207,278, a 29.9% decrease from the same period last year. The number of construction starts, which directly affects the number of occupancy, was 102,299, a sharp decline of 54.1% compared to the same period last year.
The reason for the significant decline in construction starts as well as permits is that costs have risen significantly due to high interest rates and material cost increases, and the project financing (PF) market for financial companies has contracted sharply due to the burden of unsold properties. Accordingly, it is expected that a comprehensive range of measures will be included to prevent the supply of private housing from being cut off through various financing support measures, such as strengthening PF guarantees and extending loan maturity, as well as measures to expand supply in the public sector.
There are two ways to supply supply: building new houses to increase the supply, or having existing owners sell their houses. The policy of forcing existing owners to sell their homes has a short-term effect, but it is difficult to expect a noticeable, long-term supply expansion effect because various issues are intertwined, such as individual tax burden at the time of sale and coordination of use times with tenants. The previous government attempted to increase supply by increasing the number of items offered by existing owners through stronger taxes and loan regulations, but it is assessed to have failed to achieve any practical effect.
The recent situation in the United States is somewhat different. According to Redfin, an American real estate brokerage, the total housing prices across the United States last month reached $46.8 trillion (regarding 6.24 trillion won), the highest level ever. The reason that housing prices in the United States, which had been predicted to decline, turned around is interpreted to be because the balance between supply and demand has collapsed. The number of home transactions across the U.S. in July fell 36% compared to January, which was caused by a decrease in supply as owners who were looking for a new home gave up on moving and did not put their properties up for sale.
American homeowners, who generally purchase homes with long-term fixed-interest loans, purchased homes with loans at virtually zero interest rates right following COVID-19. Therefore, if they purchase a home once more, if they receive a mortgage loan at the current 7% level, their financial burden will increase, so the number of homeowners putting their homes up for sale is increasing.
Building a new building is a sure way to expand supply, but the problem is that it takes time and money. Now is the time to prepare supply measures to implement stable housing policies in the mid to long term rather than now. However, it seems that the policy can achieve practical effects only when it is a reasonable policy that is balanced with demand and not just a policy to support housing supply.
Myeong-Sook Ahn, General Director of Lucent Block Real Estate
1695138782
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