▲ AI PRISM* Personalized Economic Briefing
* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six tailored news items for each reader type.
[Key Issues Briefing]
■ Moves to lift transfer curbs on redevelopment projects: Land, Infrastructure and Transport Minister Hong Ji-sun said at a parliamentary audit on the 23rd that the government will review ways to ease restrictions on transferring reconstruction and redevelopment association member status in speculative overheating zones. After the Oct. 15 measures last year designated all of Seoul as a speculative overheating zone, the number of project sites subject to transfer restrictions rose sharply, and the redevelopment industry and the Seoul Metropolitan Government have steadily called for the curbs to be removed.
■ Time to re-examine returns on the weak-yen investment boom: Remittances by South Korean residents to buy property in Japan surged sixfold from $13 million in 2023 to $77.7 million last year, but experts warned that local home prices and lending rates have risen together, making it hard to apply past investment formulas as they are. The industry says investors must carefully examine net operating income (NOI), or annual rent minus operating costs.
■ Warning signs for financial soundness: The won-denominated loan delinquency rate at domestic banks climbed to 0.69% in August, the highest in nine years and 10 months since October 2016. The Financial Supervisory Service said the level remains manageable as it is below the long-term average of 0.78% before COVID-19, but it projected that delinquency rates will rise further, led by vulnerable groups, as market interest rates continue to trend higher.
[News of Interest to Real Estate Investors]
1. Land Minister: "Reviewing Easing of Transfer Curbs on Redevelopment Association Status"
Key points: Land, Infrastructure and Transport Minister Hong Ji-sun said at a parliamentary audit on the 23rd that the government will review easing restrictions on transferring reconstruction and redevelopment association member status in speculative overheating zones. After the Oct. 15 measures last year designated all of Seoul as a speculative overheating zone, the number of project sites where transfers are restricted following association establishment approval rose sharply, and the redevelopment industry and the Seoul Metropolitan Government have continued to call for the curbs to be lifted. Rep. Hwang Hee of the Democratic Party of Korea said that restricting the transfer of association member status while pushing tax policies designed to encourage multiple-homeowners to sell makes it difficult to find buyers. The government also signaled that it will soon announce additional support measures for vulnerable borrowers in preparation for prolonged high interest rates.
Key points: Remittances by South Korean residents to buy property in Japan surged sixfold from $13 million in 2023 to $77.7 million last year, pushing Japan's share of all overseas property remittances to 17.1%. Experts said the weak yen has created buying opportunities, but warned that rising local home prices could offset the currency advantage, noting that the average price of a newly built condominium in Tokyo's 23 wards jumped to 142.49 million yen in the first half of this year. Lending rates have also approached 3%, making it harder to boost returns on equity through borrowing as in the past, and the industry stressed that investors must carefully examine net operating income (NOI), which deducts operating costs, rather than headline yields. Local consulting firms say a used home in Tokyo is a realistic option for those with at least 1 billion won in equity, while major cities such as Osaka are more practical for those with around 500 million won.
3. August Bank Delinquency Rate at 0.69%, Highest in 9 Years and 10 Months
Key points: The won-denominated loan delinquency rate at domestic banks rose 0.06 percentage points from the previous month to 0.69% in August, the highest since October 2016, or nine years and 10 months. The delinquency rate for small and medium-sized enterprises topped 1.00%, and the rate for large companies set another record after July, as repayment burdens from prolonged high interest rates accumulate among smaller firms and small business owners. The Financial Supervisory Service said the level remains manageable as it is below the 10-year long-term average of 0.78% before COVID-19, but it expects delinquency rates to rise further, led by vulnerable groups, as market interest rates keep trending higher even after the Bank of Korea held its base rate at 3.00%.
Key points: The average 30-year fixed mortgage rate in the United States reached 7.40% on the 15th, according to Freddie Mac, the highest in three years since November 2023, sharply curbing home sales across the country. The National Association of Realtors' pending home sales index for September plunged 7.3% from August to 66, the lowest on record since 2001, and data from real estate platform Redfin showed that as of September there were 62.6% more sellers than buyers nationwide, the highest level since 2013. The chief economist at the National Association of Home Builders said a 7.5% mortgage rate will become the new normal. Among builders, 43% said they had cut sales prices because of weak demand, with an average reduction of 6%.
