“The Daegu real estate market is in an environment where prices will continue to decline for the time being. It will be the same next year, but it seems that this atmosphere may soften a little at the end of the year.”
Park Ji-min, CEO of Monthly Subscription Research Institute (Photo·39) to the question of ‘when will the Daegu real estate market recover?’ answered, “If I had to pick a difficult place in the national real estate market, I mightn’t leave out Daegu.”
House prices in Daegu are falling helplessly. According to the Korea Real Estate Agency, as of the first week of August (1st), house prices in Daegu fell 0.13%. It was the 38th straight week of decline. In this year, Daegu as a whole fell 3.99%, and Dalseo-gu (-6.2%) and Jung-gu (-5.13%) saw the biggest declines. The same goes for pre-set prices. Jeonse prices fell 4.79% this year, and Jung-gu plunged by up to 11.9%.
The cause is a ‘supply bomb’. In Daegu, the supply of 13,660 households in 2020 has already started to exceed the reasonable demand of 11,870 households. Following this, the supply or expected to significantly exceed the appropriate demand, such as △16,904 households in 2021, 19,812 households in 2022, 34,419 households in 2023, and 2804 households in 2024.
“The biggest cause is supply,” said CEO Park. “Since the supply in the region is constantly pouring in, the Jeonse price is primarily weak, and the weak Jeonse price is leading the decline in the market price.” He continued, “Under this situation, the price of newly sold apartments is around 600 million to 700 million won, so the market is slow to absorb them and the sale is accumulating.”
Permeation zones were lifted and regulations were lifted… “The market will not change.”
In June, the government lowered the regulatory rating of Suseong-gu, Daegu from the overheated speculation district to the adjustment target area, and lifted the adjustment target area for the remaining seven areas. Nevertheless, the atmosphere is not easily reversed. Just one month following the Daegu market was lifted from the regulated area, four districts (middle, east, south, and Dalseo-gu), half of the eight districts and counties in Daegu, were designated as unsold management areas. This is because unsold unsold units have not been resolved even following the restrictions are lifted.
As of the end of June, the number of unsold apartments in Daegu stood at 6718, the most in the nation. Of the 27,910 unsold housing units nationwide, 24% of them are concentrated in Daegu. The five areas with the largest number of unsold homes in Daegu are △Dalseo-gu (2346 households) △Dong-gu (1384 households) △Jung-gu (1022 households) △Suseong-gu (844 households) △Nam-gu (720 households). However, as Suseong-gu is an area subject to adjustment, designation of the unsold management area was avoided.
CEO Park Ji-min said, “Dalseo-gu and Dong-gu, Daegu, were areas that had to be reorganized in Daegu because there were many old houses.” However, it coincided with the real estate downturn, leading to a sharp drop in prices.”
He continued, “Most of the Daegu market has been lifted from the regulated area and designated as an unsold housing management area, but it is difficult to expect a reversal of the atmosphere. “It is difficult to create an environment that can revive the buying trend as external pressures such as concerns regarding a decline are too strong.”
“Next year will be difficult…there is a possibility that the atmosphere will soften”
The downturn in the Daegu real estate market is expected to continue for some time. This is because supply is expected to continue to exceed the appropriate demand. The price increase is also expected due to the revision of the price ceiling system. The government is discussing ways to reflect tenant relocation costs, operating loss compensation costs, and name litigation costs in the sale price.
The macro environment surrounding the real estate market is also unfavorable to the market. It is predicted that the pace of rate hikes by the Bank of Korea might be accelerated. This is because the inflationary pressure was heightened as the consumer price inflation rate recorded 6.3% last month, the highest in 24 years.
CEO Park Ji-min said, “For a transaction to take place in the real estate market, there are no items for sale, so either a situation is created with more buyers, or the price must be dramatically low enough to convince end users, but this is not the case in Daegu. “Unless we stop raising prices and release money once more, there is no room for the market to recover,” he said.
CEO Park said there is room for a reversal of the market atmosphere. He said, “As the 500 million won pre-sale rights, which are currently for sale in Daegu, will move in one following another until the first half of next year, there will be a decrease in cheap properties. There is a high possibility that this will happen, and if that happens, the atmosphere will be relaxed little by little.” However, it is difficult to say with certainty, he explains.
Daegu end-user, now is your chance
For end-users who have to ‘buy their own house’ in Daegu, I think now is an opportunity. It is said that it is better to contemplate a sale rather than an offer.
CEO Park said, “It is better for end-users who are considering subscriptions in Daegu to give up right now.” “There is an opportunity to build a new house by the end of the 500 million won or even the 400 million won range,” he emphasized.
He continued, “There are only a few left in the market for sale rights that can be bought and sold,” he said. It’s just a situation that is lower than the market price.”
He continued, “After that, if the market situation improves a little, you can organize the existing houses you have moved in through the sale rights and take a strategy to receive new construction.” It’s not a bad strategy,” he added.
In 2017, CEO Park Ji-min started taking classes at Konkuk University, Dongguk University, and real estate investment cafes. He is running a Naver cafe ‘Monthly Cafe’ and a Naver blog ‘Monthly Dragon’s Real Estate Journal’. He has a history of winning more than 100 students in subscriptions.
astronaut. housekeeper (宇), homeowner (宙), and person (人). The symbolism of a house in Korea is unique. The house, which should be a space for living and resting, is intertwined with financial technology at some point, and if you can’t get it in your hand, you will feel a sense of relative deprivation. Through ‘Song-ryeol Lee’s Astronaut’, we hear stories related to real estate through people. [편집자주]
Reporter Song-ryeol Lee of Hankyung.com [email protected]
Photo/Video = Reporter Choi Hyuk at Hankyung.com [email protected]
