The first rate hike in 15 years in a row… A ‘downtrend’ in the real estate market

[아이뉴스24 이영웅 기자] The Monetary Policy Committee (Monetary Policy Committee) of the Bank of Korea raised the key interest rate to 1.25%, the level just before the novel coronavirus infection (COVID-19). Interest is paying attention to whether this will put a wedge in the real estate market, which has been on a downtrend following two consecutive hikes since November last year.

According to the financial authorities on the 16th, the Monetary Policy Committee held the first regular meeting of the Monetary Policy Committee of the new year on the 14th and raised the base rate by 0.25 percentage points. This is the consecutive increase since the rate hike last November. This is the first time that the BOK has continuously raised interest rates after changing the meeting of the Monetary Policy Committee, which determines interest rates, to eight a year in 2017.

Lee Ju-yeol, President of the Bank of Korea [사진=한국은행]

The reason for the BOK’s successive rate hikes is that the price flow is not serious, and it is a decision to respond to an early US interest rate hike. Recently, as the real estate market entered a wait-and-see situation, the high household debt has somewhat subsided, but it seems to have been taken into account that it is still high.

The BOK has already hinted at an additional rate hike on several occasions. Lee Ju-yeol, governor of the BOK, said last year, “The interest rate of 1.0% per annum is still at an accommodative level.”

Interest is focused on the impact of such a base rate hike on the real estate market. With the second-stage regulation on the total debt-to-income ratio (DSR) being implemented from this year, if it coincides with the base rate hike, it is expected that the purchase of apartments will actually stop. The government is planning to supply a total of 460,000 units this year by expanding the amount of pre-orders.

Confidence in buying apartments across the country is already frozen. According to the Korea Real Estate Agency, the nationwide apartment sales and supply index recorded 95.4 in the second week of January this year (as of the 10th). This is 0.2 points lower than the previous week. As a result, the selling trend was greater than the buying trend for the sixth week.

The supply and demand index is an index of the proportion of supply and demand by analyzing the real estate agency’s survey of member brokerages and the number of items for sale on the Internet. A value closer to ‘0’ means that supply is greater than demand, and a value closer to ‘200’ means that demand is greater than supply. The price of officetel, which was an alternative to apartments, is falling sharply.

The Seoul apartment transaction price index in November last year was 179.9, down 0.79% from the previous month. Unlike the market price trend survey, the actual transaction price index is evaluated to accurately reflect the market situation as it is based on the actual transaction price. The prevailing prediction is that an interest rate hike will further cut off housing transactions amid weakening buying sentiment.

Kim Hyo-sun, senior member of real estate at NH Nonghyup Bank’s WM Division, said, “The interest rate hike is at the level before Corona, but the loan interest rate is rising faster, so the anxiety about ‘Young-Chul’ and ‘Debt struggle’ will be greater.” The contraction in the housing market will inevitably accelerate, and the trade cliff will continue until the presidential election,” he said.

/ Reporter Young-woong Lee ([email protected])



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