It will go to 1 billion won, but this is a place where you can buy for 100 million won, so you need to get in now.
Kim Hak-ryeol, head of the Smart Tube Real Estate Research Institute, whom we met at his office in Dangsan-dong, Seoul, on Jan. 27, did not mince words. He said some areas in northern Gyeonggi Province, currently non-regulated, are likely to see transportation conditions improve, making now the time to buy a home. Specifically, he mentioned Deogyang-gu in Goyang, Gyeonggi, and Paju, which can use the Great Train eXpress (GTX)-A line. If you look a little, there are listings in the 500 million won range now, and using a loan, you can buy a home with 100 million won of your own capital that will be worth more than 1 billion won going forward, Kim predicted. He also picked jeonse prices as an indicator that people looking to buy this year must check, advising, "You should buy where jeonse prices have risen above the levels of September to October 2021."
Kim is a real estate expert known by the pen name "Ppasong." He served as a research team leader at Gallup Korea and now communicates with the public through his YouTube channel Smart Tube (Studio TV·230,000 subscribers), among others. The following is a Q&A with Kim.
-Will the government's supply measures be effective in stabilizing home prices?
You can't stabilize it with supply measures. The government knows that. The government has no choice but to watch as home prices rise and Seoul overheats. To at least slow the pace of the rise a bit, it has halted transaction through regulations such as the land transaction permit zones and lending curbs. The current regulations are merely about delaying the rise even a little.
-Why do you assert that supply measures are ineffective?
In the supply measures on Sept. 7 last year, they said they would supply 1.35 million homes in the Seoul metropolitan area over five years. They said 270,000 units a year, but the benchmark was groundbreaking, not move-ins. That means in many cases they won't even break ground within President Lee Jae-myung's term, through 2029. The market cannot stabilize.
-Were past supply measures also all ineffective?
Looking back at history, there was exactly one time it was effective. During the Roh Tae-woo administration, the first-phase new towns were built. Two million homes were supplied over four years. It was unprecedented. At the time, the total number of homes nationwide was 6 million. The complexes in Bundang, Ilsan, and Seoul's Sanggye and Junggye were all created then. The effect was seen as people moved in after President Kim Young-sam took office. But the conditions now do not allow for that.
-Why is the government imposing strong lending regulations and heavier real estate taxes?
It fears so-called asset parking and is trying to block it. Asset parking means taking money earned from stocks and buying real estate. Even if real estate is weak, stocks can rise or fall. But when the stock market is strong, the end has always been a rise in real estate, because people have engaged in asset parking. The government will try to block liquidity from flowing into real estate to the very end.
-What happens when regulations are tightened like this?
It actually pushes home prices up. For example, if you try to buy an apartment in a land transaction permit zone, you can't buy it if you own an apartment elsewhere. You must sell your existing dwellings. Even if you have an apartment in a provincial area, you can't buy a Seoul apartment in a land permit zone. The reason the slump in provincial real estate markets continues now is that people sell their provincial apartments and move to Seoul to buy in Seoul, and the impact of the land transaction permit system is significant. It is a policy that wrecks provincial real estate markets and pushes Seoul home prices even higher.
-Does this phenomenon also affect the rental market?
Yes. As the preference for one solid home in Seoul strengthens, the market is being distorted. Under the land transaction permit system, every time there is one transaction of a Seoul apartment, one listing piles up in the provinces. Also, to sell a Seoul apartment, landlords must have tenants move out, so the number of renter households in Seoul continues to decline and jeonse prices rise.
-What should the government do to stabilize home prices?
Not regulations, but allowing real estate transaction to occur easily based on supply and demand. Then prices find stability.
-Be specific.
The current stock of apartments in Seoul is about 1.9 million units. Annual new apartment supply is about 40,000 households in big years and under 20,000 in lean years. But whether the annual new supply is 40,000 or 20,000 isn't important. What matters is whether transactions for the 1.9 million units are proceeding smoothly or not. Those 1.9 million units are evenly spread among new builds, semi-new, and older stock. If appropriate transactions occur according to supply and demand, the market stabilizes and home prices will not whipsaw.
-If there are areas you recommend for end users to buy, what are they?
I recommend Deogyang-gu in Goyang, Gyeonggi, and Paju. Most of southern Gyeonggi is regulated. Loans don't come through and prices are already expensive. But places like Deogyang-gu can use GTX-A, are non-regulated, and home prices are around 500 million won. For first-time homebuyer loans, 80% of the home price can be financed, so you can buy with 100 million won. I'm talking based on a 30-pyeong apartment. These places will go above 1 billion won.
-Why are you confident the value of homes there will rise?
Places where home prices rose share a common denominator. They either have many good jobs or strong transit that allows commuting there. Specifically, access to Gangnam, Yeouido, and Gwanghwamun must be good. In particular, Gangnam District has 850,000 jobs, the most among the 226 cities, counties, and districts nationwide. The reason southern Gyeonggi is much more expensive than the north is that you can get to Gangnam within 30 minutes. But once GTX-A opens through Samseong Station, it will take 20 minutes from Unjeong in Paju to Samseong Station. When GTX-A Changneung Station opens, it will be in the 15-minute range to Samseong Station. Dongtan is 44 kilometers from Seoul, and home prices there now exceed 2.2 billion won. That's because you can reach Gangnam's Suseo Station in under 20 minutes. We know when and how the transit lines will open, and we know the areas. That's why we're confident.
GTX-A Changneung Station is a key transit facility within Changneung New Town in Deogyang-gu, Goyang. It is slated to open in 2030, and once open, it will take 10 minutes to Seoul Station and in the 15-minute range to Samseong Station. GTX-A Samseong Station is scheduled to open in 2028, and once open, it will take a little over 20 minutes from Unjeong Jungang Station in Paju to Samseong Station.
-How can end users buy a home without taking a loss?
If you had to look at just one indicator to gauge what will happen to a home after you buy it, look at the jeonse price. September to October 2021 was the peak for both sales and jeonse prices for almost all homes nationwide. Over the next three to four years, both sales prices and jeonse adjusted. Now, in some key areas of Seoul, record-high prices are emerging that surpass those peaks. Complexes where jeonse prices have nearly reached or surpassed those peaks are good to buy now. That's because it means there is demand willing to pay more than those frothy 2021 levels to live there. In such places, sales prices are likely to rise over time.