Seoul Mayor Oh Se-hoon said home prices in South Korea's capital are likely to climb through the end of this year or into early next year, led by the city's outer districts. A shortage of jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) listings and rising lease and monthly rent prices are prompting owner-occupier buyers to purchase homes, sustaining price gains on the city's fringes, he said. On the government's policy focus on owner-occupancy, Oh said "another name for a multiple-home owner is a private rental business operator," urging a policy shift toward expanding the supply of leased and rented homes.
"Panic Buying by People Who Feel They Must Buy Now Is Lifting Prices in Outer Districts"
Responding to a question from Rep. Eom Tae-young of the People Power Party about the outlook for Seoul home prices, Oh said at a National Assembly Land, Infrastructure and Transport Committee audit of the Seoul city government, held at City Hall in Jung-gu on the 19th, that "the general forecast among real estate experts is that prices are more likely to trend upward than to fall through the end of this year or early next year." He added that this was "because Seoul's jeonse supply has been depleted and lease and monthly rent prices are rising." Oh went on to say that "even people who had no particular need to buy a home are joining speculative demand out of a desperate sense that they must buy now, late as it is," noting that "the rise in apartment prices in outer areas such as eastern and southwestern Seoul will be hard to halt for some time."
That assessment differs in tone from outlooks presented earlier by the government and the Korea Land & Housing Corporation (LH). At a committee audit on the 7th, Land, Infrastructure and Transport Minister Hong Ji-sun said housing prices in the three Gangnam districts and Yongsan-gu had turned lower and projected that the pace of price increases would ease by year-end. LH President Lee Sung-hoon went as far as to mention the possibility of a sharp drop in prices.
Replying to a question from Rep. Jeong Dong-man of the People Power Party, Oh also warned that strains in the lease and monthly rent markets could spill over into higher purchase prices. "Jeonse listings in the northeastern and southwestern districts on Seoul's outskirts have fallen by 70% to 80%," he said. "As long as the current strain in the lease and monthly rent markets persists, a rise in purchase prices in outer Seoul is as clear as day."
"Multiple-Home Owners Serve a Rental Housing Supply Function"
On the government's policy toward multiple-home owners, Oh stressed that their role in supplying rental housing must also be taken into account. While acknowledging that holding multiple homes can carry a speculative element, he said "those units are being provided to citizens in the form of rentals," adding that "experts are seriously concerned about whether emphasizing owner-occupancy, as the government is now doing, can actually ease the strain in the jeonse and monthly rent markets." He continued: "The president and the land ministry must not turn away from the seriousness of this. It is time to shift away from a fixation on owner-occupancy and put forward measures to ease the strain in the lease and monthly rent markets." Asked by Jeong for his view on the president's remarks about jeonse, Oh said "there appears to be a hostile perception of jeonse," calling it "not desirable."
An exchange with the opposition over responsibility for the decline in housing supply also followed. In a supplementary question, Rep. Jang Jong-tae of the Democratic Party of Korea pressed: "Since you took office, completed housing volume in the three Gangnam districts has risen while it has fallen in the other 22 districts. Did the government order all of this as well?" Oh countered that "the time required to push through redevelopment projects has to be taken into account." Redevelopment and rebuilding of aging apartment complexes account for about two-thirds of new housing supply in Seoul, he explained, and preliminary steps alone — district designation, formation of a promotion committee and establishment of an association — take several years before project implementation approval or management disposal approval. "There are also cases where permit applications are not filed because projects lack economic feasibility," he said. "It is a mistaken criticism to say that the small number of permits is the result of the city government being lax."