This situation has caused many netizens to watch, and some even lamented the "stability" of housing prices in China. So why did Korean housing prices plummet? In my opinion, it is mainly due to the following four reasons:
First of all, let's talk about the special lease system in Korea, full rent. Speaking of "full rent", many domestic partners may not know what kind of system this is. Simply put, the landlord rents the house to the tenant, and the tenant pays the landlord 70% of the value of the house. After two years, the landlord will return the deposit to the tenant in full, and the landlord can enjoy interest-free loans in these two years.
When the house price is high, both the tenant and the landlord will benefit, but if the house price falls sharply, the interests of both parties will be damaged. Landlords suffered operating losses due to falling house prices (many landlords in South Korea are real estate speculators), and as a result, the tenant's deposit could not be fully returned according to the original amount. In the long run, there will be no capital injected into the real estate industry, which will trigger a chain reaction, leading to the decline or even collapse of Korean housing prices.
Second, the Bank of Korea's interest rate has been rising continuously. Before 2022, house prices in South Korea will continue to rise, especially in Seoul. Many people are more willing to invest in real estate than the interest income from putting assets in the bank.
However, since 2022, the growth rate of house prices has slowed down, and house prices in some places have also declined to varying degrees. While house prices are falling, the Bank of Korea raises interest rates (in response to the Fed's interest rate hike to stabilize the domestic economy). The market's sentiment towards real estate investment is generally not high, and it is more willing to put money in the bank, which leads to the increasingly severe form of housing prices in South Korea.
In addition, South Korea has a serious trade and export deficit. South Korea is a country that relies heavily on import and export trade, and a large part of its economy comes from trade and export. However, in recent years, due to the Black Swan incident (COVID-19 epidemic), the deterioration of relations between South Korea and neighboring countries and the weak global economy, South Korea's foreign trade can be said to be "terrible".
Some media reported that "South Korea's exports in April were 49.62 billion US dollars, down 14.2% year-on-year, and its monthly exports decreased for seven consecutive months from June 10 in 2022." The sharp drop in exports has seriously affected residents' income and market confidence, and the drop in house prices can be said to be reasonable.
Finally, South Korea's fertility rate has fallen sharply. In 2022, South Korea's total fertility rate was only 0.78, and it is expected to drop below 0.7 in 2023. By then, South Korea's total fertility rate will rank first from the bottom among the mainstream countries in the world. The low birth rate means that there will be fewer and fewer young people and a large proportion of old people.
Only when the population of a place continues to grow can the demand for real estate grow steadily. There are fewer and fewer people, where there are people buying houses, and the houses left by our ancestors are enough.
To sum up, the collapse of housing prices in South Korea can be said to be inevitable. At the same time, I hope to learn from it, establish a good real estate industry order and protect the interests of the general public.