Housing market bouncing back

A couple passes by signboards indicating house prices in Gangam-gu, southern Seoul, on May 5. The housing market has shown signs of rebound, with the trading volume picking up following the announcement of the government’s stimulus package on April 1. / Yonhap

Trading volume, sales price, rent point to upturn

By Yi Whan-woo

The housing market shows clear signs of bottoming out, with three key indicators ― trade volume, sales prices and rent ― pointing to an upturn in April.

The change came because of a growing number of people seeking to purchase homes returned to the market following the announcement of a government stimulus package on April 1.

According to the Ministry of Land, Infrastructure and Transport, Thursday, a total of 79,503 houses changed hands in April across the country, up 17.5 percent from a year before.

On Wednesday, Deputy Prime Minister and Strategy and Finance Minister Hyun Oh-seok said that the housing market is showing signs of recovering.

"The housing market has been showings signs of steady improvement since the announcement of those measures," Hyun told a meeting with other policymakers, citing the latest home transactions figures.

In line with the pickup in trade volume, the weekly sales price of apartments nationwide rose by 0.11 percent on average as of Monday, according to data released by the Korea Appraisal Board (KAB), Friday. It was the eighth straight week of increases.

Jeonse amounts, another market indicator, are also on the upward trend. Jeonse, Korea’s unique rental system, is based on a lump sum deposit a tenant payment to their landlord at the start of a rental contract. Tenants get the money back with no interest when the contract expires, typically after two years, with the imputed interest considered as rent.

And the nationwide jeonse charge on Monday climbed by 0.14 percent on average from the previous week, the KAB said. With such an increase, the average jeonse price was equivalent to over 60 percent of the house price overall, promoting tenants to move toward purchasing their own homes, an expert said.

The minister added that the recovery in the housing market will likely gain more momentum in the months to come as the promised tax benefits started to go into effect.

“The stimulus package is definitely a positive impact on consumers who are now relieved from anxiety in spending their money on real estate,” said Park Won-kab, a real estate team head at KB Kookmin Bank. “And if the average jeonse price continues to rise like that, it is very likely that consumers will spend their money to buy homes.”

Park warned there are still risky factors to consider in deciding whether to buy homes.

“For instance, the affluent southern Seoul area with a number of old apartments is where a land development project will take place under the city government,” he said. “And it’s cautious to say the increase in apartment prices there is attributed to the government’s stimulus package.”

The package centers on tax breaks for homeowners and control of the supply of new homes to keep prices from falling.

The government exempted first-time homebuyers with a combined annual income of less than 60 million won ($53,800) from acquisition tax when they purchase a house worth less than 600 million won and less than 85 square meters. This tax break is available until the end of the year. The owners of multiple homes were also exempted from paying the tax.