Zhou Chao: What kind of warning does South Koreas house price fall?

Source: Zhongxin Jingwei

Author: Zhou Chao

Recently, Korean house prices have plummeted.It is reported that housing prices in some areas of Seoul fell 40%, and the transaction volume plummeted by 70%, and banks were disconnected by millions of people.According to the Asian Daily, the public announcement price of common residential houses such as apartments and multi -units in South Korea in 2023 decreased by an average of 18.63%from 2022, a record high.

What are the reasons that cause the current status quo in South Korea's property market?

The fall of house prices in South Korea (especially Seoul) plummeted, the root cause is the overall population trend of South Korea.South Korea ’s comprehensive fertility rate has been less than 1 for a long time. As far as the newborn population is concerned, on the occasion of the millennium, the number of births in South Korea has fallen below 600,000. In 2022, only 249,000 people were born.Possibility.Therefore, the lack of sufficient population support is the root cause of the decline in Korean house prices.

For direct reason, because loan buying a house is the main way to buy a house in Koreans, the supply and interest rate level of M2 currency is critical.The US interest rate hike process in the United States forced all allies to follow up with interest rate hikes, and the supply volume of M2 was also rapidly limited.

Data show that since November 2022, the total amount of M2 currency in South Korea has stagnated, which directly stimulates that House's house prices have continued to fall.The Fed's continuous interest rate hike forced the Central Bank of Korea to follow up, which greatly limited the total amount of M2 and destroyed the driving force for house prices.

The geographical location of Seoul is near North Korea. The current South Korean government has resolutely move closer to the United States and Japan in terms of politics, diplomacy, technology, and military.Favorite Busan, the second largest city in South Korea.Therefore, the population of South Korea may be absorbed by Busan a considerable part in the future, which is even more detrimental to the strong housing price of Seoul.

For the current property market, the South Korean government has taken a series of measures.South Korean Finance officially issued a market plan for 500 trillion (Korean won, S $ 50 billion) in October 2022.In order to expand the implementation of liquidity, stabilize the stability of the domestic financial market.

From the end of 2022 to the beginning of 2023, the South Korean government has relaxed a number of supervisors in the real estate market, relaxed the loan regulations for specific people, implemented the preferential interest rate loan discounts of specific groups, and reduced comprehensive real estate tax rates.With the timely intervention of South Korea's officials, the real estate financing market showed signs of improvement. In March 2023, the spread between South Korean corporate bonds and national debt fell until early 2022, and house prices once stabilized.

Even if South Korea has adopted a series of financial policies for the stable property market in many ways, the overall downward trend and debt arrears of house prices in South Korea still have not improved at all.

On May 24, the South Korean Financial Services Commission stated that the risk still exists in view of the global interest rate path and uncertainty.Especially the structural problems of the Korean real estate market, such as high debt ratio and strong speculation, are not fundamental, the export performance of superimposed as the economic pillar is still unsatisfactory. It is expected that short -term measures will resolve and stabilize the current property market in Korea.Essence

Unique "full rent" is full of financial risks

In the past five years, House prices in Seoul, South Korea have doubled, and government stimulus policies have set off a wave of nationalized house purchase.

Among them, the "full rent" system, as a characteristic system of the Korean housing market, plays a role in helping the territory.Under this system, the tenant pays a large deposit to the landlord (the deposit is about 50%-80%of the real estate value).The tenant returned the deposit as the landlord.

This surface is a rental model, but it is essentially a loan.The deposit is that the landlord borrowed money from the tenant with the mortgage of the house, and the way to pay the interest is to give the tenant to the rent -free rent.After getting this money, the landlord will take a re -investor (often buying a house again), and rented the new house again for profit, forming a cycle in turn.In most cases, the landlord does not have the ability to return the tenant's deposit, and can only rely on subsequent tenants' rent to repay.Therefore, it is important to remain rising in South Korea.

But as South Korea continues to raise interest rates and interest rates have risen, many Koreans have been forced to abandon the form of full rent.And it is impossible to obtain enough deposit that means that the landlord's capital chain is broken, and you have to rely on selling other properties (often discounts) to repay the rent, and concentrated selling will promote the decline in house prices.EssenceIn short, the whole rental system actually plays the effect of amplifying the financial risks of the real estate market in Korea.

What warning to Chinese real estate?

Since 2021, the Chinese property market has also entered in -depth adjustment, and housing prices in some non -hot cities have decreased even as high as 20 %.

House prices in some cities in China are similar to South Korea's property market. It shows that the net outflow of the Chinese urban population in the decline in house prices is obvious, and the population support is weak. In the previous wave of housing prices, the speculative color was stronger.Therefore, the population support foundation is weak and the housing speculation is strong. This is the most obvious similarities with the decline in cities in some housing prices in China and the development of some cities in Korea.

In China, although there are also methods such as loan and loan in the past, after the rectification of many real estate markets, by cracking down on financial instruments such as "down payment", the Chinese property market strictly does not exist to double it to be able to achieve more.Financial tools that amplify financial risks.Moreover, housing prices in first -tier cities in China are generally stable. Therefore, systemic financial risks have caused the possibility of collapse of the property market. This is the biggest difference between China's real estate development in South Korea.

The reason why the South Korean property market can have today, the biggest problem may be that real estate is regarded as a short -term effective means to solve economic growth, causing the deep bundling of the national economy and real estate, making subsequent regulation and unbinding difficulties.

South Korea's house prices have plummeted, and the landlord's funds chain breaks the cruel reality. The most damaged group is still ordinary people. This part of the group itself has poor risk.Still paying rental loans.

At present, the performance of the Chinese property market is not ideal. On the one hand, it is not advisable to continue to expect the property market to solve the urgent development of the national economy, but on the other hand, it cannot let go of house prices wanting to fall wanton.The basic stability of the real estate market should be maintained as a whole to avoid systemic financial risks and effectively maintain the wealth of ordinary people.