Interest in how the real estate market will change after the 21st presidential election on June 3 is increasing among industry experts.
Experts evaluated that the real estate pledges made by presidential candidates from each party lack substance, predicting that regional polarization will continue as it did in the first half of this year even after the election.
Looking closely at the real estate pledges of the major presidential candidates, Lee Jae-myung of the Democratic Party of Korea promised to renovate the aging infrastructure of the first new towns such as Bundang, Ilsan, Sanbon, Jungdong, and Pyeongchon, and to support the reconstruction of old planned cities such as Suwon, Yongin, Ansan, and Incheon. He stated that if redevelopment and reconstruction projects are pursued in Seoul's aging downtown, he would raise the floor area ratio and ease the burden of contributions. He also mentioned the creation of a fourth new town with convenient transportation in the metropolitan area to provide dwellings for the youth and newlyweds who do not own a home.
Kim Moon-soo of the People Power Party proposed to supply dwellings that support housing costs or loan interest for a total of 9 years, with 3 years granted upon marriage, an additional 3 years upon the birth of the first child, and 3 more years upon the birth of the second child, providing 100,000 units annually. He also stated that he would increase the supply of dwellings for the youth, newlyweds, and families with children to 200,000 units each year, and would also increase the supply of small apartments and officetels for single-person households. He suggested transferring the authority for redevelopment and reconstruction to local governments to shorten the project duration, which currently takes more than 15 years; for instance, in Seoul, this means transferring authority from the metropolitan government to local districts.
Lee Jun-seok of the Reform Party announced plans to focus on supplying dwellings with an exclusive area of 59 square meters during reconstruction and redevelopment while expanding the supply volume through high-density development. He stated that he would flexibly reduce real estate taxes and ancillary expenses such as acquisition tax and capital gains tax according to lifecycle changes from early career individuals to the elderly.
◆There is agreement on 'supply expansion' through the activation of redevelopment and reconstruction
Real estate experts evaluated that the common theme in the real estate pledges of presidential candidates is the activation of redevelopment and reconstruction projects to expand the supply of dwellings.
Ham Young-jin, head of the real estate research lab at Woori Bank, noted, “Overall, the pledges from presidential candidates to expand supply in the metropolitan area will have a positive impact on the real estate market in the metropolitan area, including Seoul, which is expected to see a significant decrease in the number of move-ins from next year,” adding that “after the election, construction companies are likely to initiate postponed sales schedules, leading to a possibility of a greater supply volume in the second half compared to the first half of the year.”
However, experts analyzed that while the candidates' general trend toward supply expansion is aligned, they have not revealed specific timelines, methods, or scales for the supply, so the short-term impact on the real estate market is expected to be minimal.
Professor Ko Joon-seok of Yonsei University’s Graduate School of Business stated, “Although all major candidates have promised to expand supply, they have not disclosed detailed plans regarding when, where, and how much to supply.”
Kim Duck-rye, a researcher at Daewoo E&C, commented, “The current presidential election appears to have caught candidates off guard, leading them to not formulate their real estate pledges elaborately; it seems that none of the candidates' pledges stand out significantly.”
Song Seung-hyun, CEO of Urban and Economy, evaluated, “This is an extension of real estate pledges seen in previous elections,” stating that “there are no impactful pledges regarding land ownership taxes or equity-based dwellings, and it seems that candidates are refraining from mentioning real estate regulations while gauging voter responses, making it difficult for the real estate market to experience significant changes for the time being.”
There were also opinions that it would be realistically difficult to ease real estate regulations after the election.
Kim Hak-ryeol, head of Smart Tube Real Estate Research Institute, explained, “The Yoon Suk-yeol government is also pursuing easing regulations for multiple homeowners and the acquisition tax, but has not been able to pass any bills in the National Assembly,” adding that “no matter which candidate becomes president, there is a hurdle of passing through the National Assembly, making it hard for regulations to be eased and the real estate market to change significantly.”
Experts predict that if the amount of move-ins declines from next year in the metropolitan area, and if it coincides with interest rate cuts in the second half of this year, a trend of rising prices may emerge.
On the other hand, it is expected that the market stagnation will continue in the provinces, as it is difficult for demand recovery that could help the real estate market and external conditions are also worsening.
Professor Ko Joon-seok stated, “Since supply occurs in the medium to long term, even if a supply plan is disclosed immediately, it is unlikely to have an immediate effect on the market,” adding that “what influences housing prices is supply and interest rates; therefore, as supply decreases in the metropolitan area, particularly in Seoul, when interest rates fall, actual demand from home seekers will lead to price increases.”
Kim Duck-rye, head of the Housing Industry Research Institute, also mentioned, “In the metropolitan area, apartment prices are rising around Seoul, while prices in the provinces continue to decline; this trend is expected to persist for the time being,” stating that it would be difficult for most provinces, except for Sejong which has issues related to the presidential office relocation, to see market improvement.
Kim Hak-ryeol predicted, “In areas where apartment prices are popular in Seoul, prices will continue to rise, while areas severely affected by stagnation in the provinces will struggle to transition to recovery.”
Ham Young-jin forecasted, “Although transaction volumes in Seoul are unlikely to recover significantly, the trend of rising prices is expected to continue, mainly in the metropolitan area focusing on Seoul.”
◆How much have housing prices risen under past governments' real estate regulations?
Meanwhile, generally, past governments' real estate policies showed that when regulations were eased, housing prices slightly rose or fell, and when regulations were strengthened, prices increased. However, during the Kim Dae-jung administration, in the economic recovery period following the International Monetary Fund (IMF) foreign exchange crisis, despite the easing of regulations, housing price increases were high.
The Kim Dae-jung government implemented policies to ease real estate regulations, such as reductions in capital gains tax and the abolition of resale restrictions, to recover the economy after the IMF foreign exchange crisis. According to the Korea Real Estate Board’s nationwide housing price trend survey, from February 1998, during the Kim Dae-jung administration, the nationwide housing sales price index rose by 19.3% to February 2003, while in Seoul, it increased by 33.2%.
The Roh Moo-hyun government pursued real estate regulatory policies, such as introducing the comprehensive real estate tax and the redevelopment burden, to curb speculation. From February 2003 to February 2008, the nationwide housing sales price index rose by 24.1%, while in Seoul, it increased by 42.9%.
The Lee Myung-bak government launched policies to ease real estate regulations related to the comprehensive real estate tax and redevelopment to stimulate the economy. From February 2008 to February 2013, the nationwide housing sales price index rose by 12.7%, while in Seoul, it increased by 1.5%.
The Park Geun-hye government introduced measures to activate supply by abolishing the sales price ceiling system and deferring the recovery of excess profits from redevelopment. During the Park Geun-hye administration, the nationwide and Seoul housing sales price index rose by 6.9% and 7.6%, respectively, from February 2013 to March 2017.
The Moon Jae-in government implemented various real estate regulatory policies, such as strengthening the comprehensive real estate tax and capital gains tax, to curb real estate speculation. From May 2017 to May 2022, the nationwide housing sales price index rose by 18.2%, and in Seoul, it increased by 20.9%.
The Yoon Suk-yeol government has pursued policies to ease real estate regulations by increasing supply and easing regulations on maintenance projects and the comprehensive real estate tax and capital gains tax. From May 2022 to April this year, the nationwide housing sales price index dropped by 8.3%, with a 2.7% decrease in Seoul as well.