Vol. 5 Korea Real Estate Market Report
2016 Real Estate Market Trends and 2017 Outlook
Real Estate Research Institute of KAB KAB Real Estate Market Report
Greetings
This is the fifth volume of the Korea Appraisal Board (KAB) Real Estate Market Report (2016 Real Estate Market Trends and 2017 Outlook). With the enactment of the Korea Appraisal Board Act in September 2016, KAB has undergone a transformation from an organization specializing in real estate appraisal to an organization dedicated to real estate market surveys and management as well as making announcements of official land value and related statistics. Maintaining order and stability in the Korean real estate market is an especially important task undertaken by KAB. The KAB Real Estate Market Report published semiannually in the first and second halves of the year provides reliable information on the real estate market including the future outlook, based on comprehensive and in-depth analyses of the current trends, with the aim of ensuring order in the real estate market. The real estate market in Korea in 2016 became more stable compared to the previous year due to the influence of the economic slowdown and the new loan restriction policy concerning tighter loan review regulations. Notable trends in the year included the overheated pre-construction parceling-out market for the Gangnam reconstruction projects and the rise in housing prices in the Seoul Capital Area; however, following the announcement of the real estate policy on November 3, 2016 speculative investments declined, and the market became more stabilized centering on actual demand. Also, in some of the regions outside the Seoul Capital Area, real estate prices began to be on a downturn as a result of an industrial recession and increased housing supply. As for the real estate market outlook for 2017, the intent to purchase homes is expected to fall due to the high probability of a hike in the interest rate in Korea, as a result of the U.S. Federal Reserve’s announcement of its plans to raise the interest rate over the course of the year. Also, the continued economic uncertainty at home and abroad, the rationalization of the mortgage policy, and higher housing supply are expected to become factors contributing to the shift in the sales market toward a downward stabilization, while the Jeonse market is expected to show stability. For this report, the major issues in the real estate market in addition to the current trends and outlook were analyzed in depth for a better understanding of the real estate market. First, in order to make an accurate diagnosis of the increasing economic risk factors in Korea and abroad and the rise in household debts, the level and structure of KAB Real Estate Market Report
household debts in Korea as well as the characteristics of the households with debts were analyzed. In addition, amid the growing voices of concern regarding the demographic cliff and a sharp drop in housing demand resulting from low fertility and population aging as well as long-term stagnation in the housing market, data on the actual residential property transactions were used in a regression analysis of apartment purchases by age group, the results of which showed that the aging population contributed to the demand in the housing market. Moreover, the apartment subscription market in 2016 was diagnosed based on a comparison of the regional apartment subscription competition ratios through analyses of subscription competition ratios and time-space hot spots, as well as analyses of the determinants of the subscription competition ratios and similarities of the apartment subscription markets across the regions. Lastly, in order to analyze the factors influencing the predictions of housing prices, an empirical analysis was performed in regard to the correlations and causal relationships between the macroeconomic variables and housing prices nationwide. It is our hope that the market analysis data provided in this report serve as a basis for making judgments from a more balanced perspective. KAB will be committed to its role in performing multi-faceted, in-depth analyses and providing fair and comprehensive real estate market information through the Real Estate Market Report as a means to ensure stable housing for the citizens of Korea and support the policy implemented to advance the real estate market.
Thank you.
Real Estate Research Institute of KAB
Director Chae Mie Oak
CONTENTS
PART 1 | Market Trends 1
Macro Economy and Real Estate Market 2 Housing Market 12 Land Market 42 Commercial Real Estate Market 61
PART 2 | 2017 Housing Market Outlook 85
PART 3 | In-Depth Analysis 91
Analysis ① | Risk Diagnosis of Domestic Household Debts and Response Measures 92 Analysis ② | The Population Aging and Housing Transactions : Evidence From the Real Estate Trade Management System Data 104 Analysis ③ | Diagnosis of the 2016 Housing Subscription Market 116 Analysis ④ | Analysis of Patterns in the Determinants of Housing Prices 132
PART 4 | Issue Analysis 143
Shift Toward Rentals and Rent Burdens 144 Supply, Transaction Volume and Sales Price Index of Row Houses and Multi-housing 154 Burden of Jeonse and Rental Costs on Single-member Householdsg 165 Market Trends and Outlook on Aggregate Retail Shop Market 173 KAB Real Estate Market Report Korea Real Estate Market Report
P A R T 1 Market Trends
Macro Economy and Real Estate Market Housing Market Land Market Commercial Real Estate Market Macro Economy and Real Estate Market
Min Chulhong, Park Jinbaek
Domestic Economic Trends
In the case of the domestic economic trends, exports began to show an upward trend in November 2016, but market anxiety caused a slowdown in the domestic economy resulting in slower recovery.
○ Economic Growth Rate The economic growth rate in 2016 3Qwas recorded at 2.6%, compared to the same period in the previous year, while it fell from 3.3% in 2016 2Q.
○ Private Consumption The rate of increase in private consumption was 2.7% in 2016 3Q, which was a 0.6%p decrease from the previous quarter, indicating a slowdown in the private consumption growth rate.
Figure 1-1 Real GDP and growth rate
400 9
300 6
200 3
100 0
0 -3 `02.3Q `03.3Q `04.3Q `05.3Q `06.3Q `07.3Q `08.3Q `09.3Q `10.3Q `11.3Q `12.3Q `13.3Q `14.3Q `15.3Q `16.3Q GDP (Real, original series, YOY comparison %)(right) GDP (market price, trillion KRW)(left) Source: Bank of Korea (BOK)
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Figure 1-2 Rate of change in private Figure 1-3 Rate of change in equipment consumption investment (Unit: %) (Unit: %)
8% 30%
20% 6%
10% 4% 0%
2% -10%
0% -20% `10.3Q `11.3Q `12.3Q `13.3Q `14.3Q `15.3Q `16.3Q `10.3Q `11.3Q `12.3Q `13.3Q `14.3Q `15.3Q `16.3Q Rate of change in private consumption (real, YOY comparison) Rate of change in equipment investment (real, YOY comparison)
Source: Statistics Korea Source: Statistics Korea
○ Equipment Investment The equipment investment growth rate decreased to 4.2% in 2016 3Q due to the plunging demand for transportation equipment following the termination of a discount policy on the individual consumption tax, and the equipment investment index is projected to be low for some time, as the global economic slowdown is expected to continue.
Construction Industry Trends
Construction investment has shown a growth trend with a high value of construction completed centering on the building sector. Amidst this trend, an improvement was observed in construction contract wins, which are a leading indicator, in 3Q.
○ Construction Investment Investments into residential buildings increased by 21.27%, which drew strength from the favorable conditions in residential construction investment, while investments into building construction and non-residential buildings increased by 15.58% and 10.60%, respectively. The total construction investments recorded an 11.27% increase in 2016 3Q.
3 Table 1-1 Rate of change in construction investment, value of construction completed and contract value by sector
(YOY comparison, Unit: %) 2015 2016 1Q 2Q 3Q 4Q 1Q 2Q 3Q Construction investment 0.72 1.37 5.50 8.29 9.59 11.04 11.27 Building construction 3.15 4.44 7.95 13.92 15.16 15.86 15.58 Residential buildings 6.26 10.66 15.56 24.60 23.06 24.42 21.27 Non-residential buildings 0.63 -0.45 2.07 5.58 8.39 8.37 10.60 Civil engineering construction -3.38 -4.19 0.64 -2.84 -0.54 1.45 2.06 Value of construction completed -1.72 -3.80 6.16 8.00 14.78 19.20 17.16 Architecture -0.20 -3.53 10.76 16.31 22.11 26.54 22.93 Civil engineering -4.27 -4.27 -1.91 -4.52 1.99 6.41 5.71 Contract value 57.44 49.06 50.35 40.09 13.81 -6.30 2.71 Architecture 89.47 49.33 42.53 37.81 13.13 2.46 4.24 Civil engineering 1.67 48.26 83.57 45.86 16.00 -32.81 -2.34 Note: Data on the YOY changes in real (construction investment for gross capital formation), fixed (value of construction completed) and current (contract value) accounts (%) Source: Statistics Korea
○ Value of Construction Completed Although the rates of increase in both the architecture and civil engineering sectors decreased slightly, they still showed favorable trends, with the value of construction completed in the architecture and civil engineering sectors increased by 22.93% and 5.71%, respectively, and the total value of construction completed in 2016 3Q increased by 17.16%.
○ Contract Value The contract value in the architecture sector increased by 4.24%, whereas the rate of decrease in the contract value in the civil engineering sector contracted to 2.3% compared to 2Q. Accordingly, the rate of change in the contract value of construction projects in 3Q shifted to an upward trend. However, the level of increase is expected to become low in the offing due to the base effect and a weakened rate of increase compared to the year 2015.
○ The 1.7%p increase in GDP in 2016 3Q was attributable to the growth in construction investments, and the ratio of construction investment growth to GDP growth was approximately 65%. This indicates favorable trends in construction investments, which are shown to be leading the economic growth. It should be noted, however, that the economic growth was heavily reliant on civil engineering and housing construction, rather than an increase in private consumption and equipment investment.
4 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1-4 GDP growth attributable to construction investments (YOY comparison, Unit: %p, %)
10
8
6
4 2.6
2 1.7 0
-2 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2010 2011 2012 2013 2014 2015 2016 GDP growth _ Excl. construction investments (%p) GDP growth attributable to construction investments(%p) GDP growth (%) Source: Bank of Korea (BOK)
While the number of unsold apartment units from pre-construction parceling-out sales has been stabilized, there has been a slowdown in the rate of increase in the number of construction permits and approvals given and construction projects that have commenced. However, the cumulative number of construction permits and approvals given and construction projects that commenced prior to the period under examination is resulting in an increase in the completion of construction projects. Thus, there is a need to examine the number of unsold apartments periodically in the future.
○ The number of unsold apartment units from pre-construction parceling-out sales (unclaimed supply) was 58,000 as of November 2016, which was a 0.2% decrease from the previous month. The number of unsold apartment units has gradually been decreasing since August 2016 in a relatively stable manner.
○ The number of housing construction projects that have been initiated were 574,000 as of November 2016, which was a 9.5% YOY decrease. The number of commencing housing construction projects showed a YOY decrease every month in 2016, indicating that the new housing supply is being adjusted in accordance with the concerns of excess housing supply.
○ Housing construction permits and approvals have been given for 637,000 housing units as of November 2016, which was a 4.5% YOY decrease. While this is still a high number compared to in the past, it has been exhibiting a decline.
5 ○ The number of housing construction completions in 2016 recorded a 14.5% YOY increase, with the construction 450,000 units completed as of November 2016. This reflects the increase in the construction permits and approvals that had been given and the construction projects that were initiated in 2014 and 2015.
Figure 1-5 Unclaimed supply trends Figure 1-6 Housing construction (Unit: thousand units) commencements (Unit: thousand units)
80 140 150% 70 120 120% 60 100 90% 50 80 60% 40 60 30% 30 40 0% 20 20 -30% 10 0 -60% 0 `13.2M `13.11M `14.8M `15.5M `16.2M `16.11M `13.2M `13.11M `14.8M `15.5M `16.2M `16.11M YOY rate of change in housing construction commencements (Right) Number of housing construction commencements
Source: Ministry of Land, Infrastructure and Transport Source: Ministry of Land, Infrastructure and Transport
Figure 1-7 Housing construction permits and Figure 1-8 Housing construction completions approvals (multi-housing by individual building)
(Unit: thousand units) (Unit: thousand units)
140 80 120% 120 60% 90% 60 100 60% 80 40 30% 60 10% 0% 40 20 20 -30% 0 -40% 0 -60% `13.2M `13.11M `14.8M `15.5M `16.2M `16.11M `13.2M `13.11M `14.8M `15.5M `16.2M `16.11M YOY rate of change in housing construction permits and approvals (Right) YOY rate of change in housing construction completions (Right) Number of housing construction permits and approvals given (Left) Number of housing construction completions (Left), thousand (individual building)
Source: Ministry of Land, Infrastructure and Transport Source: Ministry of Land, Infrastructure and Transport
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Loan Market Trends
Household loans recorded KRW 1,228 trillion in 2016 3Q, which was a 3.0% YOY increase and a 0.1%p increase compared to the 2.9% increase in 2016 2Q.
○ Household loans, which were KRW 806 trillion in 2011 4Q, increased by KRW 422 trillion over the course of 6 years to KRW 1,228 trillion in 2016 3Q.
○ The increase in household loans is mainly attributable to the increase in mortgages in recent years. Based on the prediction that there will be a growing demand for loans to pay for day-to-day living expenses resulting from the prolonged economic slowdown and declining disposable income, it is expected that real estate-secured loans for day-to-day living expenses will be taken out and this will cause the household loans to continue to grow.
○ The market interest rate will increase due to the concerns of inflation in the U.S.A., which means that a hike in the lending interest rate by the domestic banks will be inevitable. Accordingly, there will be a need to manage the credit risks of small business owners and low income households, who have taken out loans to fund their businesses and to pay for their living expenses, respectively.
○ It is necessary to continue to the efforts to qualitatively improve the structure of household debts by encouraging borrowers to make a principal repayment by an installment plan or change to a fixed interest rate, as a means to prepare for the shock arising from a hike in the interest rate in the mid and long term. This is also a time point at which an employment promotion plan and a reinforced financial support system should be pursued to assist small business owners and low income households, who are at a relatively greater risk of defaulting on their loans.
7 Figure 1-9 Trends in household loans and Figure 1-10 Rate of change in household mortgages loans and mortgages
1,500 1,228 5% 1,158 1,200 1,101 999 1,039 4% 939 965 886 909 840 863 900 771 806 3% 2% 600 1%
300 544 445 470 480 509 0% 354 369 383 393 399 401 409 422 -1% 0 `10.3Q `11.3Q `12.3Q `13.3Q `14.3Q `15.3Q `16.3Q `10.3Q `11.3Q `12.3Q `13.3Q `14.3Q `15.3Q `16.3Q Mortgages from banks (trillion KRW) Rate of change in household loans (YOY) Household loans (trillion KRW) Rate of change in mortgages from banks (YOY) Household loans Source: Statistics Korea Source: Statistics Korea
Interest Rate
In the case of the U.S., the continuous drop in the unemployment rate, economic recovery, and projections of stable economic growth are factors that are raising the probability of an inflation. The U.S. Federal Open Market Committee (FOMC) raised the benchmark interest rate in December 2016, with the aim of maintaining the inflation rate at around 2%, and this consequently has increased the pressure to make an interest rate hike in Korea.
○ As for the factors influencing the domestic interest rate, the economic growth rate was 2.6% in 2016 3Q, but it should be noted that the 1.7% growth was attributable to construction investments and only 0.9% to other sectors. The unemployment rate has been on a continuous rise from 3.1% in 2013 to 3.9% in 2016 3Q. These factors are putting a downward pressure on the economy.
○ The annual inflation rate in 2016 was 1.0%, which was lower than the price stability target, and considering that it has been dropping continually from 4.0% in 2011, a monetary policy to stimulate the economy is deemed necessary. However, due to the interest rate hike by the U.S. FOMC in December 2016 and three additional hikes announced for the year 2017, there is a pressure to raise the interest rate in Korea.
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○ A hike in the benchmark interest rate may potentially cause the inflation rate to decline further from 1.0% (2016) and impose a heavy burden on borrowers to pay back the principals of their household loans, thereby resulting in a sluggish asset market. Thus, there is a need to pay careful attention to the monetary policy announced by the Financial Services Commission (FSC). It is projected that the interest rate hike in Korea will occur in the latter half of 2017 when the U.S. benchmark interest rate surpasses that of Korea.
Table 1-2 Current and projected benchmark interest rates in Korea and the U.S.A.
(Unit: %) `10 `11 `12 `13 `14 `15 `16 `17(e) Korea 2.5 3.25 2.75 2.5 2 1.5 1.25 - U.S.A. 0.13 0.13 0.13 0.13 0.13 0.38 0.63 1.38 Source: BOK, IMF, FOMC
Forecasts on External Conditions
It appears that none of the advanced countries will be able to boost economic growth in the near future. Amidst this situation, countries around the world have been implementing fiscal and financial policies to the point where they no longer have the capacity to further execute additional policies. This is expected to cause the difficult economic circumstances to continue, and in turn result in weakened solidarity among the nations and a wider implementation of protective trade policies. Consequently, this will ultimately lead to anti- globalization tendencies.
○ In the case of the U.S., there has been a boost in consumption, centering on durable goods, and the unemployment rate has dropped below 5%, which is a near-full employment rate. There are expectations of an increased probability of mid- and long-term economic growth and a higher inflation rate based on President Trump’s pro-business and large-scale fiscal policies, and accordingly, the benchmark interest rate will continue to be raised to attain the target price stability level of 2%.
9 ○ As for Japan, Abenomics, which has been implemented for years, is deemed to have failed in boosting exports, and it did not result in a sufficient rise in wages. Thus, a virtuous cycle for economic recovery could not be formed. The value of the Japanese yen surged every time anxiety was high in the global financial markets, due to the preference for safe assets, and the burden on the fiscal soundness has made aggressive spending difficult as well.
○ In China, sluggish growth has continued on, and the global economic downturn is expected to prolong the slump in exports, thereby causing a contraction in corporate investments. However, there is a possibility that a large-scale economic stimulus plan may be implemented prior to the upcoming National Congress of the Communist Party of China, where the new leadership of the Communist Party of China will be elected.
○ In the case of Europe, the economy was stimulated by an increase in bank loans resulting from the monetary easing policy implemented by the European Central Bank (ECB); however, the low interest rate has deteriorated the soundness of the banks and it is deemed difficult to implement an additional monetary easing policy due to the risks involved. Also, due to the prolonged economic recession, refugee issues, and risk of terrorism, there have been a growing number of supporters for the conservative party in each country, with intensified nationalistic tendencies.
○ Shale oil production in the U.S. has declined as it has become less lucrative due to low oil prices, and the excess supply of crude oil has contracted. Accordingly, the international oil prices have risen quickly from around USD 20 in 2016 to about USD 50 more recently. Also, with the technical advancement of shale oil extraction, the crude oil prices are expected to stabilize in 2017.
Table 1-3 Economic growth rates and forecasts announced by IMF
(Unit: %)
Advanced Emerging Global U.S.A. China EU Japan Korea nations nations
2015 3.2 2.1 4.0 2.6 6.9 2.3 0.5 2.6 2016 (e) 3.1 1.6 4.2 1.6 6.6 1.9 0.5 2.7 2017 (e) 3.4 1.8 4.6 2.2 6.2 1.7 0.6 3.0 2018 (e) 3.6 1.8 4.8 2.1 6.0 1.8 0.5 3.1 Source: IMF
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The real estate markets in major countries are showing varying trends depending on the extent of their domestic economic recovery.
○ There was a sharp increase in real estate property prices in the U.S. and U.K. in 2016, whereas the rate of increase slowed down in Australia.
○ In Japan, the rate of increase in housing prices slowed down once in 2014, but the prices have been on the rise since then. As for China, there was a shift to an upward trend in 2016.
○ Continuous monitoring of the real estate market in each country is deemed necessary due to the presence of various risks pertaining to the political and economic issues in Europe, possibility of interest rate hikes in the U.S., and sluggish growth in China among other factors.
Table 1-4 Rate of change in housing prices
(YOY rate of change, Unit: %) U.S.A. U.K. Australia China Japan EU 2012 8.0 1.0 3.0 -0.5 -0.4 -2.1 2013 10.3 4.4 10.0 9.1 2.8 -1.4 2014 5.0 8.5 6.8 -3.4 0.6 0.8 2015 5.3 6.5 8.7 -0.3 2.0 2.2 2016 5.7 8.7 4.1 5.2 3.0 3.0 Source: BIS
11 Housing Market
Lee Junyong, Min Chulhong
Trends in Housing Prices
1) Housing Price Trends in 2016
House Sale Price The rate of increase in the house and apartment sales prices in 2016 was 0.7% and 0.8%, respectively, which were substantially lower that of 2015 (3.6% for house and 4.8% for apartments).
Table 1-5 Rate of change in the sales prices of residential properties in 2016 by region
(Unit: %) Rate of change in sales prices of house Rate of change in sales prices of apartments Region 2014 2015 2016 2016 1H 2016 2H 2014 2015 2016 2016 1H 2016 2H Nationwide 1.7 3.6 0.7 0.1 0.6 2.7 4.8 0.8 0.1 0.7 Seoul 1.1 4.6 2.1 0.6 1.6 2.0 6.7 3.2 0.7 2.5 Busan 1.1 3.5 3.1 0.6 2.5 1.7 4.8 4.2 0.8 3.4 Daegu 6.3 8.0 -1.8 -1.3 -0.6 7.8 9.0 -3.1 -1.9 -1.2 Incheon 1.4 3.4 0.8 0.1 0.7 3.2 5.0 1.4 0.4 1.0 Gwangju 1.5 5.8 0.4 0.3 0.1 2.2 7.2 0.3 0.2 0.1 Daejeon 0.6 0.4 0.3 -0.1 0.4 0.6 0.2 0.1 -0.3 0.4 Ulsan 3.1 3.2 0.4 0.6 -0.2 3.7 4.2 0.6 0.8 -0.2 Sejong -0.2 -0.1 0.8 0.2 0.6 -1.8 -1.0 0.5 0.2 0.3 Gyeonggi 1.8 4.5 0.8 0.2 0.6 2.8 6.1 1.1 0.2 0.9 Gangwon 0.3 2.2 1.4 0.6 0.8 0.5 3.4 2.1 0.8 1.3 Chungbuk 2.4 1.1 -0.7 -0.3 -0.4 3.8 2.1 -1.5 -0.7 -0.8 Chungnam 2.3 0.8 -1.5 -0.9 -0.6 4.3 0.7 -3.1 -1.6 -1.5 Jeonbuk -0.5 0.4 0.1 -0.1 0.2 -0.8 0.6 -0.2 -0.3 0.1 Jeonnam -0.8 0.9 1.1 0.4 0.7 -1.8 0.8 1.6 0.7 0.9 Gyeongbuk 3.6 2.6 -1.7 -0.8 -0.9 6.6 3.7 -4.4 -2.0 -2.4 Gyeongnam 2.2 1.6 -0.6 0.0 -0.6 2.7 2.1 -1.3 -0.3 -1.0 Jeju 1.5 8.1 4.6 3.8 0.8 3.3 13.7 7.2 5.2 1.9
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○ The rate of increase in the residential property sales prices in Seoul and Busan dropped significantly in the first half of 2016; however, the rate of increase recovered to the level observed in the previously year, and was steady at around 2~3% in the second half.
○ In contrast, the residential property sales prices fell in the first or second half of the year in Daegu, Daejeon, Ulsan, Chungbuk, Chungnam, Jeonbuk, Gyeongbuk, and Gyeongnan, indicating a downward trend in the metropolitan cities and provinces outside the Seoul National Capital Area.
House Jeonse Prices The rate of increase in the jeonse (referring to residential property leases with large deposits without monthly rent payments) prices of house and apartments nationwide in 2016 was 1.3% and 1.9%, respectively, and this is substantially lower than the rate of increase (4.9% and 7.0%, respectively) reported for 2015.
○ Of particular note, the jeonse prices skyrocketed in the Seoul National Capital Area in 2015, but it stabilized in 2016. As for the changes in the rate of increase in the apartment jeonse prices between 2015 and 2016 by region, it decreased considerably from 10.8% to 2.8% in Seoul, 8.6% to 3.4% in Incheon, and 10.0% to 2.9% in Gyeonggi-do Province.
○ As for Daegu and Chungnam (Chungcheongnam-do Province), where there has been an increased supply of housing as of late, both the sales prices and jeonse prices showed a downward trend. In Daegu, in particular, the level of decrease in prices in 2016 was around one-third to one-fourth of the level of the annual average increase rate between 2014 and 2015, and considering this, it is difficult to say that the prices have plummeted.
○ In Seoul, Gyeonggi and Jeju, where the rate of increase in the jeonse prices of apartments in 2015 was over 10%, the price increases slowed down to a rate of 1/4, with the jeonse market becoming largely stabilized.
13 Table 1-6 Rate of change in the jeonse prices in 2016 by region
(Unit: %) Rate of change in jeonse prices of house Rate of change in jeonse prices of apartments Region 2014 2015 2016 2016 1H 2016 2H 2014 2015 2016 2016 1H 2016 2H Nationwide 3.4 4.9 1.3 0.7 0.6 5.1 7.0 1.9 1.1 0.9 Seoul 3.5 7.2 1.9 1.0 1.0 5.3 10.8 2.8 1.3 1.4 Busan 1.7 3.2 2.9 1.1 1.8 2.5 4.7 4.4 1.8 2.6 Daegu 6.1 6.9 -1.6 -0.9 -0.7 7.8 8.4 -2.3 -1.4 -1.0 Incheon 4.8 6.0 2.2 1.2 1.1 7.6 8.6 3.4 1.7 1.6 Gwangju 1.8 6.3 0.9 0.8 0.1 2.7 8.0 1.0 0.8 0.2 Daejeon 1.5 1.4 1.4 0.8 0.6 1.7 1.9 2.0 1.1 0.9 Ulsan 1.8 2.0 0.4 0.7 -0.3 2.2 2.5 0.6 0.9 -0.3 Sejong -6.4 0.1 4.0 2.0 2.0 -13.6 -0.2 5.7 2.9 2.7 Gyeonggi 5.7 7.3 2.0 1.2 0.9 8.0 10.0 2.9 1.6 1.2 Gangwon 0.8 2.4 1.4 0.6 0.8 1.7 3.7 2.2 0.9 1.3 Chungbuk 2.4 2.3 1.7 0.9 0.8 4.0 3.8 2.8 1.6 1.2 Chungnam 3.3 2.1 -1.0 -0.5 -0.5 6.3 3.1 -1.8 -0.9 -0.9 Jeonbuk 0.2 0.7 0.9 0.5 0.4 0.6 1.3 1.2 0.6 0.6 Jeonnam -0.3 1.4 1.2 0.5 0.7 -0.4 1.7 1.5 0.6 0.9 Gyeongbuk 2.9 2.2 -1.1 -0.5 -0.6 5.4 3.6 -2.5 -1.1 -1.4 Gyeongnam 2.5 1.6 0.6 0.3 0.3 3.0 2.0 0.8 0.5 0.3 Jeju 2.0 5.3 1.8 1.6 0.3 5.0 10.2 2.8 1.9 0.8
Summary The region where the housing market was booming in 2016 was Jeju, where an upward trend in housing prices has been continuing since 2015. The Seoul National Capital Area and Busan showed a steady increase in residential property prices, while the prices remained steady or showed a steady downward trend in other regions.
○ With the increase in jeonse prices in the Happy City regions, there was a marked increase in the jeonse prices in Sejong. This could be attributed to the temporary increase caused by expiration of jeonse contracts as well as the base effect from the drop in jeonse prices a couple of years ago (-13.6% in 2014 and -0.2% in 2015) resulting from an increased housing supply.
○ In Jeju, where the apartment sales prices surged (13.7%) in 2015, the rate of increase dropped to 7.2% in 2016. More specifically, the rate of increase fell to 5.2% in the first half of 2016 and 1.9% in the second half. - The rate of increase in the jeonse prices of apartments in 2016 (2.8%) dropped
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significantly compared to the previous year (10.2%). Considering the noticeable downward trend in the apartment jeonse prices in the second half of the year, it is deemed that the price stabilization is also occurring in Jeju.
○ Meanwhile, in the case of Ulsan, the rate of increase remained steady in districts other than Dong-gu, where workers in the shipbuilding industry and related industries mostly resided, in the first half of 2016. However, in the second half of the year, the sales and jeonse prices of residential properties showed a downtrend across the entire city of Ulsan, based on which it can be inferred that the stagnancy of the housing market caused by the decline of the shipbuilding industry is becoming more widespread.
Table 1-7 Summary of the changes in the residential property prices in 2016
2015 2016 Price change House Apartments House Apartments Increase in jeonse Seoul, Incheon, Seoul, Incheon prices Gwangju, Gwangju, Sejong > Increase in sales Gyeonggi, Gyeonggi
crease prices In Incrase in jeonse or Daegu, Jeju Daegu, Jeju Jeju sales prices Busan, Ulsan, Seoul, Busan, Gangwon, Busan, Ulsan, Busan, Sejong, Incheon, Marginal increase Chungbuk, Gyeongbuk Jeju Gyeonggi, Chungnam, Gyeo- Chungbuk ngbuk Sales domi- nance Seoul, Daegu, Sejong, Gangwon, Gwangju, Sejong, Jeonbuk, Daegu, Gwangju, abilization Jeonbuk, Ulsan, Gangwon, St Sales=jeonse Jeonnam, Ulsan, Gangwon, Jeonnam, Chungnam, Jeon- Gyeongnam Jeonnam Gyeongnam buk, Jeonnam, Gyeongbuk Incheon, Daejeon, Daejeon, Chun- teadiness or decrease Daejeon, Jeonse domi- Gyeonggi, gnam, Jeonbuk, Chungbuk, Daejeon nance Chungbuk, Gyeo- Gyeongbuk, Chungnam ngnam Gyeongnam
Note: An “increase” is defined as an increase of 5% or more in the annual price increase rate, and “marginal increase” as an increase of 2.5% or more and less than 5%, while all other cases fall into the category of “steadiness or decrease.” If the deviation between the price increase rates is under 1%, the rate is considered similar. The rate of price increase was adjusted based on the standards set for the aforementioned annual period.
15 2) Trends in Apartment Prices by Period1)
Short- and Long-term Changes in the Apartment Sales Prices The rate of change in the real apartment sales prices nationwide in the past year was -0.5%, which was lower than the short- and long-term annual average rates of change.
○ The short- and long-term annual average rates of real price change (1.1% for both) increased, but the rate of real price change in the past year was in the minus, indicating a decrease in the real prices, without taking inflation into consideration.
○ The regions where the rate of change in the real apartment sales prices in the past year surpassed the short- and long-term annual average rates of change were Seoul, Busan and Jeju. Jeju, in particular, recorded the highest rate of real price change (5.8%) among these regions.
○ The regions where the rate of change in the real apartment sales prices changed markedly in the past compared to the past were Daegu, Chungbuk, Chungnam and Gyeongbuk. It was significantly lower than the short- and long-term annual average rates of change, indicating a need to continually monitor the supply-and-demand situation of the housing market in these regions.
Figure 1-11 A comparison of the short- and long-term rates of change in the real apartment sales prices by region
Metropolitan cities Provinces
10% 10%
5.8% 5% 5% 2.4% 2.8% 1.2% 0.0% 0.7% 0.2% 0% 0% -0.5% -0.3% -1.0% -1.2% -0.7% -1.5% -4.4% -2.8% -4.4% -2.6% -5% -5% Gang Gang Incheon Busan Daegu Gwang Dae Ulsan Gyeon Gang Chun Chung Jeon Jeon Gyeong Gyeong Jeju -buk -nam -ju -jeon -ggi -won -gbuk -nam -buk -nam -buk - nam Nation Seoul 6 metropolitan cities 9 provinces -wide Long-term (Dec. 2013~Dec. 2016) Short-term (Dec. 2012~Dec. 2016) Past year (Dec. 2015~Dec. 2016)
1) The comparison of the average housing prices by time period (long-term, short-term, past year) was performed by converting the nominal housing price index into the real housing price index (excl. inflation), and the annual average rate of change in the housing prices was used.
16 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Short- and Long-term Changes in the Jeonse Sales Prices The rate of change in the real apartment jeonse prices nationwide in the past year (Dec. 2015 to Dec. 2016) was 0.6%, with a noticeable downtrend in the Seoul National Capital Area and Daegu, where the jeonse prices had soured in the past.
○ The short-term annual average rate of change in the real apartment jeonse prices in the aforementioned regions was approx. 6% (Seoul 5.8%, Incheon 5.9%, Gyeonggi 6.0%), but the rate of change dropped significantly in the past year to around 2%.
○ Of particular note, the short-term annual average rate of change in the apartment jeonse prices in Daegu was 5.7%, which was relatively high among the 17 cities and provinces under analysis; however, the rate of change in the real apartment jeonse prices showed a downtrend at -3.6% in the past year.
○ Provinces where the real apartment jeonse prices have dropped in the past year were Chungnam, Gyeongbuk and Gyeongnam regions, and this contrasts with the stabilization of jeonse prices in other regions.
○ Considering the rate of change in the real apartment jeonse prices in the past year has fallen below the short- and long-term rates of change in the real apartment jeonse prices in other regions, the rate of change in the jeonse prices has become very stable compared to the past.
Figure 1-12 A comparison of the short- and long-term rates of change in the real apartment jeonse prices by region
Metropolitan cities Provinces
10% 10%
5% 3.0% 5% 1.9% 2.0% 1.5% 1.1% 0.8% 1.4% 1.4% 0.6% 0.6% 0.2% 0% 0% -0.4% -0.7% -0.1% -0.5% -3.1% -5% -3.6% -5% -3.8% Gang Gang Incheon Busan Daegu Gwang Dae Ulsan Gyeon Gang Chun Chung Jeon Jeon Gyeong Gyeong Jeju -buk -nam -ju -jeon -ggi -won -gbuk -nam -buk -nam -buk - nam Nation Seoul 6 metropolitan cities 9 provinces -wide Long-term (Dec. 2013~Dec. 2016) Short-term (Dec. 2012~Dec. 2016) Past year (Dec. 2015~Dec. 2016)
17 3) Trends in the Apartment Prices in the Seoul National Capital Area
Apartment Sales Prices in Seoul by Apartment Size The apartment sales prices in Seoul in 2015 increased among the small- and mid-size apartments. Similar patterns were observed in 2016, but the overall level of increase in the sales prices was significantly lower.
○ The rate of change in the sales prices in Gangbuk, Seoul in 2016 was lower than that of Gangnam for all apartment sizes. It has dropped to half the level of increase recorded in 2015. - The rate of change in the sales prices for the small, small-to-medium, medium, medium- to-large and large apartments was 3.7%, 2.1%, 2.3%, 1.2%, and 0.9%, respectively, for the Gangbuk region, and 4.8%, 3.6%, 5.5%, 3.1%, and 2.1%, respectively, for the Gangnam region. The level of increase dropped to half the level of increase reported in 2015.
○ The rate of change in the sales prices in Gangbuk and Gangnam in 2016 was higher than the rate of change reported in 2014. A steady uptrend was observed in Gangbuk compared to a couple of years ago, while an uptrend continued in Gangnam.
Figure 1-13 Changes in the apartment sales prices in Seoul by apartment size (nominal)
Gangbuk, Seoul Gangnam, Seoul
10% 10% 10% 9.11%0% 9.1% 7.7% 7.7% 7.6% 7.6% 5.5% 55.6.5%% 5.6% 5.75%.5% 55.6.7%5%.5% 5.6% 4.8% 4.8% 4.1% 5% 35.7%% 3.7% 3.5% 5% 5% 3.6% 4.1% 3.5% 3.6% 3.1% 3.1% 2.3% 2.1% 22.3.1%% 2.1% 2.1% 1.5%1.2% 1.5% 1.2% 0.9% 0.9% 0% 0% 0% 0%
-5% -5% -5% -5% Small SmallSmall MediumSmall MediumMedium LargeMedium Large Small SmallSmall MediumSmall MediumMedium LargeMedium Large -medium -medium -large -large -medium -medium -large -large 2014 22001154 22001165 2016 2014 22001154 22001165 2016
18 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1-14 Changes in the apartment jeonse prices in Seoul by apartment size (nominal)
Gangbuk, Seoul Gangnam, Seoul
15% 15% 15% 15% 12.6% 12.6% 11.4% 11.4% 11.6% 11.6% 12% 12% 12% 111.20% 11.0% 10.1% 10.1% 10.5% 10.5% 9.3% 9.3% 8.6% 8.6% 9% 9% 8.3% 8.3% 9% 9%
6% 6% 6% 6% 3.8% 3.8% 3.1% 3.1% 3.5% 3.5% 2.5% 22.5.8%% 2.8% 2.8% 2.8% 2.7% 22..79%% 2.9% 3% 3% 2.5% 32%.5% 31%.9% 1.9% 1.1% 1.1%
0% 0% 0% 0% Small SmallSmall MediumSmall Medium MediumLarge Large Small SmallSmall MediumSmall Medium MediumLarge Large -medium -medium -large -large -medium -medium -large -large 2014 22001145 22001156 2016 2014 22001145 22001156 2016
Apartment Jeonse Prices in Seoul by Apartment Size In the case of the apartment jeonse prices in Seoul in the first half of 2016, the level of increase dropped regardless of apartment size, similar to the sales prices, to a very stable level.
○ The rate of change in the apartment jeonse prices in Gangbuk showed similar patterns as in 2015, when the jeonse prices rose mainly among the small apartments, but the level of increase contracted considerably. In the case of Gangnam, the rate of increase in the apartment jeonse prices was similar between the small and small-to-medium apartments, and the medium-to-large and large apartments.
Summary of the Trends in Seoul The number of “up areas,”2) where the rate of change in the apartment sales prices in 2016 surpassed the long-term annual average rate of change, gradually decreased, and this was also the case in the apartment jeonse market. As such, the price changes in the sales and jeonse markets across the districts occurred in a similar manner.
○ The areas where the YOY rate of change in the sales prices was high at the end of 2016 were Gangnam-gu (6.0%), Gangseo-gu (4.8%) and Gwanak-gu (4.1%), but the level of increase has
2) “Down area” is defined as a si, gun or gu (city/town, county or district) where the YOY rate of change is less than 0; “Stable area” is defined as a si, gun or gu (city/town, county or district) where the YOY rate of change is greater than 0 and less than or equal to the long-term annual average rate of change for the city or province in question (Dec. 2003~Dec. 2016); “Down area” is defined as a si, gun or gu (city/ town, county or district) where the YOY rate of change is greater than the long-term annual average rate of change for the city or province in question (Dec. 2003~Dec. 2016). The same criteria apply hereunder.
19 been gradually dropping. - Seongdong-gu, Gwangjin-gu, Dongdaemun-gu, Jungnang-gu, Seongbuk-gu, Gangbuk- gu, Dobong-gu, Nowon-gu, Guro-gu and Geumcheon-gu, which had been categorized as an “up area,” entered the category of “stable area” in the second half of 2016. As such, the apartment sales market in Seoul showed a stable uptrend overall.
○ In the case of the four districts of Gangnam, which had been towing the uptrend in the apartment jeonse prices, the level of increase in the jeonse prices dropped significantly in the second half of 2016. Meanwhile, Seongdong-gu, Gwangjin-gu, Dongdaemun-gu, Jungnang-gu, Seongbuk-gu, Gangbuk-gu, Dobong-gu, Nowon-gu, and Eunpyeong-gu, which had belonged to the category of “up area,” entered the category of “stable area” in the second half. - The areas that were an “up area” based on the YOY rate of change in the jeonse prices at the end of 2016 were Gwanak-gu (6.4%), Yangcheon-gu (6.1%), Mapo-gu (6.1%), Seodaemun-gu (5.7%) and Guro-gu (5.4%).
- On the other hand, the area where the YOY rate of change in the jeonse prices was in the minus was Gangdong-gu, where the YOY rate of change was recorded at -0.9%. However, considering that the YOY rate of change in the jeonse prices at the end of 2015 was 18.1%, it is deemed that the jeonse market in this particular district became very stable after the move-in process for the apartments built through the reconstruction projects was completed.
Figure 1-15 Patterns in the apartment price trends in Seoul by month
Number of districts by type of apartment sales price changes Number of districts by type of apartment jeonse price changes
25 25 25 1 1 1 11 11 11 1 1 1 25 1 1 1 1 1 1 1 1 1 3 2 2 23 2 2 2 3 2 2 2 22 22 2 2 2 2 2 22 2 2 1 1 2 1 2 4 3 4 4 3 4 3 3 4 4 3 3 3 3 33 3 3 3 5 5 5 5 4 4 8 8 7 7 87 87 8 8 7 7 7 7 7 7 7 7 9 9 9 9 9 9 8 8 9 1010 111010 11 9 12 12 11 11 12 12 11 11 16 16 16 16 16 161 7 17 16 16 14 14 19 19 17 17 202 0 202 0 20 20 18 18 17 17 23 23 23 22332 3 232 3 22 22 19 19 212 4 242 244 242 4 232323 21 22 222223232322 242424 242424 24 24 21 21 2021 21 23232322332233232323 23 232233 2323 20 212122 22 2222222222222222 1818 11781178 20 20 2121 141 5 1164 1 5 16 17 17 16 161717 15 1145 17 18 18 181818 181818 14 13 13 16 1716 14 14 14 14 9 9 9 13 13 9 9 8 9 8 6 10 10 5 5 5 5 5 6 5 8 9 9 7 8 7 7 7 1 1 1 1 1 1 2 2 0 0 1 1 1 1 1 1 3 4 4 1 1 1 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 3 . . . 1 1 1 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 1 1 1 1 1 1 1 1 1 . . . 4 5 6 1 1 1 1 1 1 1 1 1 0 4 5 6 0 1 1 1 1 1 1 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 ` ` ` 1 1 1 . . . 1 1 1 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 ` ` ` 1 1 1 1 1 1 1 1 1 . . . 4 5 6 1 1 1 1 1 1 1 1 1 4 5 6 1 1 1 ` ` ` 1 1 Up area Stable area Down area 1 ` ` Up area Stable area Down area ` Up areaUp areaStable Stablearea areaDown areaDown area
20 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1-16 Apartment sales prices in Incheon·Gyeonggi by apartment size Incheon Gyeonggi
10% 10% 10% 10% 8.1% 8.1%
5.7% 5.6% 5.16% 5.1% 5.7% 4.3% 4.3% 5% 5% 4.0% 34.80% 3.8% 5% 5% 3.6% 3.6% 2.0% 2.0% 2.3% 2.3% 2.0% 2.0% 2.2% 2.2% 1.4% 1.4% 0.9% 0.9% 0.0% 00..30% 0.3% 0.0% 0.10% 0.1% 0% 0% 0% 0% -0.4% -0.4% -0.2% -0.2%
-5% -5% Small-5 % Small MediumSmall MediumMedium MediumLarge Large-5% Small Small MediumSmall MediumMedium MediumLarge Large -medium -medium -large -large -medium -medium -large -large 2014 22001154 20165 2016 2014 22001154 22001165 2016
Apartment Sales Prices in Incheon·Gyeonggi by Apartment Size In 2016, the apartment sales prices in the Incheon and Gyeonggi area increased slightly mainly among the small and small-to-medium apartments, while the changes in the prices of medium and medium- to-large apartments were negligible.
○ In the case of the Gyeonggi region, the rate of change in the sales prices generally saw a significant drop. Of particular note, the rate of change in the sales prices of small apartments decreased greatly to 2.0% in 2016 compared to the previous year (8.1%). - However, in the Gyeongui (Gimpo, Goyang and Paju) and Gyeongwon (Pocheon, Dongducheon, Yangju, Uijeongbu) areas of Gyeonggi-do Province, the sales prices of small apartments increased by 3.5% and 3.4%, respectively, indicating that the uptrend was continuing compared to other regions.
Apartment Jeonse Prices in Incheon-Gyeonggi by Apartment Size Compared to 2015 when the jeonse prices increased by approx. 8~10% in the Incheon and Gyeonggi area, the rate of increase fell to around 2~3% in 2016 for most apartment sizes.
○ The jeonse prices of small apartments in Gyeonggi in 2015 increased by over 10% in most of the regions, but the rate of increase has been around 2~3% for most regions in 2016.
○ The jeonse prices have increased at a slower rate, similar to the trends observed in the sales prices. In the Gyeongui and Gyeongwon areas of Gyeonggi-do Province, where the sales prices showed an uptrend, the jeonse prices increased by 4.6% and 5.0%, respectively.
21 Similar levels of increase were observed for small, small-to-medium and medium-to-large apartments.
Figure 1-17 Apartment jeonse prices in Incheon·Gyeonggi by apartment size
Incheon Gyeonggi
15% 15% 15% 15%
12% 12% 12% 101.72% 10.7% 10.3% 10.3% 10.1% 10.1% 8.9% 8.9% 8.6% 8..63% 8..35% 88.5.5%% 8.5% 8.8% 8.8% 9% 9% 9% 9% 7.5% 7.5%
6% 6% 6% 6% 4.2% 4.2% 3.5% 3..56% 3.6% 3.3% 3.3% 2.4% 2.4% 2.8% 2..86% 22.6.5%% 2.5% 3% 3% 2.0% 2.0% 3% 3% 2.1% 2.1%
0% 0% 0% 0% Small Small MediumSmall Medium MediumLarge Large Small Small MediumSmall Medium MediumLarge Large -medium -medium -large -large -medium -medium -large -large 2014 20154 20165 2016 2014 20154 20165 2016
Summary of the Trends in Incheon·Gyeonggi The number of “up areas” in relation to apartment sales prices in Incheon and Gyeonggi decreased continually, similar to Seoul. Similar patterns were observed in the case of apartment jeonse prices.
○ All of the areas in Incheon were considered a “stable area” in terms of the apartment sales prices, and most were considered an “stable area” in terms of apartment jeonse prices. The only “up area” based on the jeonse prices was Bupyeong-gu. The YOY rate of change in the apartment jeonse prices determined in Dec. 2016 was 6.0%.
○ In Gyeonggi, most areas fell into the category of “stable area” based on the YOY rate of change in the apartment sales prices reported for Dec. 2016. The “down areas” in terms of apartment sales prices were Anseong-si (-0.3%) and Ansan-si (-0.3%). The “up area” and “down area” in terms of apartment jeonse prices were Yangju-si (5.8%) and Hanam-si (-1.0%), respectively. - The main reason behind the uptrend in prices in these regions is the improved transportation environment in the northern part of Gyeonggi-do Province. The results of an analysis showed that the uptrend was caused by the impact from the construction
22 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
of Guri-Pocheon Expressway, set to be opened next year, and the Outer Ring Express II, set to be opened in 2020, as well as the possibility of an extension of Subway Line 7 in the northern part of Gyeonggi-do Province.
Figure 1-18 Patterns in the apartment price trends in Incheon by month
Number of districts by type of apartment sales price changes Number of districts by type of apartment jeonse price changes
8 8 8 8 1 1 1 1 1 1 1 1 11 1 11 11 1 1 1 1 1 2 2 2 2 2 22 22 2 2 2 2 2 3 3 3 33 3 3 3 3 3 3 3 3 3 4 44 2 4 2 4 4 4 44 44 4 44 4 4 4 4 4 4 3 3 5 5 6 6 6 6 6 6 7 7 7 77 77 77 7 7 7 7 7 7 7 7 7 8 8 8 88 8 8 8 8 8 8 8 8 88 88 88 88 88 88 88 88 88 88 8 8 8 8 8 8 88 88 88 88 8 8 8 5 5 7 7 7 7 77 7 77 77 7 7 7 7 7 6 6 6 66 66 6 6 6 6 6 3 3 5 5 5 55 55 5 5 5 5 5 5 5 5 5 4 4 4 4 4 4 4 44 44 4 44 4 4 4 4 4 4 3 3 2 2 2 2 2 2 1 1 1 1 1 1 1 11 11 11 1 1 1 1 1 1 1 1 1 0 0 0 0 1 1 1 1 1 1 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 ...... 1 1 1 1 1 1 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 ...... 4 5 6 4 5 6 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4 5 6 4 5 6 1 1 1 1 1 1 ` ` ` ` ` ` 1 1 1 1 1 1 ` ` ` ` ` ` Up areaUp areaStable Stablearea areaDown areaDown area Up areaUp areaStable Stablearea areaDown areaDown area
1-19 Patterns in the apartment price trends in Gyeonggi by month
Number of districts by type of Number of districts by type of apartment jeonse price changes
28 28 28 28 2 2 2 2222 2 2 2 1 2 1 2 2 2 1 1 121 2 2 22 2 2 2 2 2 1 1 1 1 4 3 3 4 3 3 4 4 44 4 44 4 4 4 3 4 4 43 44 4 4 4 3 3 3 3 4 4 6 5 5 56 555 5 5 5 5 5 5 6 5 6 5 6 6 5 5 7 7 7 7 7 7 7 8 7 8 9 10 9 10 9 9 9 109 9 9 91 0 9 9 10 9 10 11 11 12 12 12 12 13 13 13 13 121 2 121 2 16 16 15 15 11 11 18 18 16 16 20 20 14 151 174 151 7 212 1 212 1 131 4 131 4 191 91 9 191 91 9 23 23 16 16 252 5 252 5 17 17 26 26 252 6 252 6 17 171 5 15 26 26 26 26 2626 2622662626 262626 24 242244242244242424 25242422452244242424 2525 252524 24 23 23 23 23 2223 2223 22 22 23 23 21 21 21 21 2120 2120 15 15 1918 1918 191919118919191198 19 1918 1918 16 16 16 16 14 14 15 15 15 15 1515 1515 12 12 13 13 10 9 10 910 10 91010 10 9 10 10 10 7 7 7 7 7 7 7 7 8 8 7 7 7 7 5 656 6 6 5 5 2 2 3 3 3 3 2 2 0 0 1 1 0 0 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 0 1 2 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 2 3 4 5 6 7 8 9 ...... 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 4 4 5 5 6 6 4 4 5 5 6 6 1 1 1 1 1 1 1 1 1 1 1 1 ` ` ` ` ` ` ` ` ` ` ` ` Up areaUp areaStable areaStable areaDown areaDown area Up areaUp areaStable areaStable areaDown areaDown area
23 Trends in Housing Transaction Volume
1) Housing Sales Transaction Volume
Summary The cumulative housing sales transaction volume as of the end of November in 2016 was 964,000 which was lower compared to that of the same period in the previous year (1,106,000), but higher than that of the same period in 2014 (914,000).
○ The cumulative sales transaction volume reported for the Seoul National Capital Area as of the end of November in 2016 was 520,000, which was the highest volume ever to be reported following 2006 (610,000) and 2015 (570,000); however, in the case of the five metropolitan cities and rural areas, the transaction volume has decreased slightly compared to other time periods.
○ The sales transaction volumes reported for the five metropolitan cities and rural areas are similar to the level in 2013, prior to the recovery of the housing market in 2014 and 2015; however, considering that the total housing supply available for transaction was higher in 2016 than in 2013, with the supply of new housing over the course of 3 years, it is deemed that the sales transaction volumes in these regions were someone low.
○ In summary, it is deemed that the overall decrease in the housing sales transactions observed recently was mainly attributable to the decrease in housing sales transactions in
Figure 1-20 Trends in housing sales transaction volume by region
(Unit: ten thousand transactions) Annual housing sales transaction volume Housing sales transaction volume from Jan. to Nov
141040 121020 11101.60.6 11191.49.4 10180.28.2 949.54.5 969.46.4 121020 101000 878.57.5 919.41.4 989.18.1 10100.50.5 969.46.4 858.45.4 292 9 89.4 323 2 797.59.5 797.59.5 101000 212 18 68.86.889.4 878.07.0 858.25.2 191 9 757.95.9 252 5 808.00.0 8080 707.10.1 272 7 737.53.5 303 0 252 5 262 6 313 16 26.72.7 8080 171 7 353 5 151 5 212 1 242 4 252 5 232 3 272 7 272 7 282 8 272 7 252 5 191 9 292 9 6060 262 6 6060 272 7 242 4 191 9 141 4 161 6 232 3 222 2 161 6 171 7 181 8 232 3 202 0 262 6 212 1 4040 191 9 4040 222 2 191 9 202 0 161 6 707 0 616 1 616 1 575 7 525 2 484 8 525 2 444 4 444 4 424 2 2020 454 5 404 0 37 464 6 2020 373 7 333 3 323 2 282 8 37 272 7 363 6 252 5 232 3 0 0 0 0 `06`06`07`07`08`08`09`09`10`10`11`11`12`12`13`13`14`14`15`15`16`16 `06`06`07`07`08`08`09`09`10`10`11`11`12`12`13`13`14`14`15`15`16`16 CapitalCapital area area 5 metropolitan5 metropolitan cities cities RuralRural areas areas CapitalCapital area area 5 metropolitan5 metropolitan cities cities RuralRural areas areas
24 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
the metropolitan cities outside the capital area. This is due to the drop in sales transactions in the second half of the year as a result of reinforced loan restrictions and increased housing supply in the rural areas.
By Housing Type In 2016 (as of the end of November), the ratio of apartment transactions to total residential property transactions increased, while the ratio of detached homes, multi- housing and row house transactions to total residential property transactions decreased. This was opposite the trends observed in 2015.
○ The ratio of apartment sales transactions to total residential property transactions increased in the capital area, whereas the ratio of detached home sales transactions to total residential property transactions was higher than that of multi-housing and row houses, and the ratio of apartment sales transactions to total residential property transactions increased in the regions outside the capital area. As such, the ratios of transactions by housing type varied across the regions.
○ Even when the data were subdivided by region, the ratio of apartment sales transactions was shown to have increased in 2016. This was due to the increase in the inventory apartments available for transactions resulting from a greater supply of new apartments, and this is why the trends observed in 2016 contrast with that of 2015.
Figure 1-21 Ratio of sales transactions by housing type and region
Nationwide Capital area Non-capital area
1100010%0%0% 100100%% 1100010%0%0% 100% 66.1.61%.%1% 7.76.%6% 9.98.%8% 9.92.%2% 1111.16.16%.%6%1122.19.29%.%9% 151.50.%0%1133.16.36%.%6% 7.6% 9.8% 9.2% 161.63.%3% 17.6% 15.0% 16.3% 17.167%.6%2200.24.04%.%4%1188.19.89%.%9% 2020.7.%7% 808%0% 1155.15.5%.%5% 151.57.%7% 8080%% 20.7% 2121.217.7%.%7% 808%0% 80% 15.7% 19.7% 1188.18.8%.%8%80% 2626.7.%7%2525.257.7%.%7%80% 1111.11.1%.%1%1100.14.04%.%4% 101.04.%4% 19.179%.7% 26.7% 1122.13.23%.%3%10.4%
6600%6%0% 6060%60%% 6600%6%0%
4400%4%0% 4040%40%% 4400%4%0% 7722.79.29%.%9%7711.74.14%.%4% 676.76.%6% 7373.732.2%.%2%7070.707.7%.%7% 7722.76.26%.%6%7722.70.20%.%0% 7700.77.07%.%7% 6655.64.54%.%4%67.6% 6363.635.5%.%5%6565.651.1%.%1% 6677.63.73%.%3% 2200%2%0% 2020%20%% 2200%2%0%
00%%0% 00%%0% 00%%0% 22QQ2Q44QQ4Q22QQ2Q44QQ4Q22QQ2Q44QQ4Q22QQ2Q44QQ4Q 22QQ2Q44QQ4Q22QQ2Q44QQ4Q22QQ2Q44QQ4Q22QQ2Q44QQ4Q 22QQ2Q44QQ4Q22QQ2Q44QQ4Q22QQ2Q44QQ4Q22QQ2Q44QQ4Q 220012130313 220012140414 220012150515 220012160616 220012130313 220012140414 220012150515 220012160616 220012130313 220012140414 220012150515 220012160616 ApartmentsApartmentsApartments Multi-housingMulti-housingMulti-housing & & row row& row houses houses houses ApartmentsApartmentsApartments Multi-housingMulti-housingMulti-housing & & row row& row houses houses houses ApartmentsApartmentsApartments Multi-housingMulti-housingMulti-housing & & row row& row houses houses houses DetachedDetachedDetached homes homes homes DetachedDetachedDetached homes homes homes DetachedDetachedDetached homes homes homes Note: The volume reported for 2016 4Q is the cumulative transaction volume from Oct. to Nov. 2016 (same applies hereunder) Source: RTMS
25 By Sales Price Range Generally speaking, there was a distinct pattern in which the ratio of transactions involving residential properties in the low (under KRW 200 million) and low- to-mid (over KRW 200 million and under KRW 400 million) price ranges decreased, while the ratio of transactions involving residential properties in the mid-to-high (over KRW 400 million and under KRW 600 million) and high (over KRW 600 million) price ranges increased. There was a marked increase in the ratio of transactions involving residential properties in the mid-to-high price range in the second half of 2016.
○ The ratio of nationwide transactions involving residential properties in the mid-to-high price range was 8~9% in 2015 (8.4% in 1Q, 9.2% in 2Q, 9.8% in 3Q, and 9.8% in 4Q), and it increased to the 11% range in 2016 (8.5% in 1Q, 9.4% in 2Q, 11.3% in 3Q and 11.9% in 4Q).
○ In the capital area, the transaction volume concerning low-priced, mid-to-high-priced and high-priced homes increased in 2016, whereas the ratio of transactions involving low-to- mid range homes decreased. - The ratio of transactions involving low-priced homes to total residential property transactions generally increased between 2015 (41.2% in 1Q, 39.% in 2Q, 38.9% in 3Q, and 39.0% in 4Q) and 2016 (36.6% in 1Q, 37.1% in 2Q, 38.5% in 3Q and 39.3% in 4Q).
○ As for the areas outside the capital area, the ratio of transactions involving low-to-mid range residential properties remained high, and the ratio of transactions involving low- priced homes increased, similar to the capital area, whereas there were no significant
Figure 1-22 Ratio of sales transactions by price range and region
Nationwide Capital area Non-capital area
110010%0%0% 110010%0%0% 110010%0%0% 55.6.65%%.6% 77.5.57%%.5% 99.6.69%%.6% 33.1.13%%.1% 44.1.14%%.1% 5.1% 66.8.86%%.8% 88.0.08%%.0% 111.16.61%%.6% 5.15%.1% 55.9.95%%.9% 99.8.89%%.8%11.9% 111.12.21%%.2%12.5% 111.91%.9% 121.52%.5%1144.3.3%% 8800%8%0% 8800%8%0% 14.3%1166.18.86%%.8%8800%8%0%
4422.4.4%% 6600%6%0% 5588.58.8%%.8%555.58.85%%.8%51.9% 6600%6%0% 42.4%4400.41.10%%.1% 6600%6%0% 7722.78.82%%.8%6699.64.49%%.4%666.63.36%%.3%6622.6.62%%.6% 515.91%.9%4466.40.06%%.0% 3388.31.18%%.1%3322.3.32%%.3%
4400%4%0% 4400%4%0% 4400%4%0%
20% 20% 40.7% 40.0% 39.3% 20% 202%0% 31.7% 31.9% 34.3% 202%0% 404.70%.7% 404.0%.0%3388.30.08%%.0%393.39%.3% 202%0% 3311.30.01%%.0% 313.71%.7% 313.91%.9%343.34%.3% 24.5% 25.6% 28.3% 222.27.72%%.7% 242.54%.5% 252.65%.6%282.38%.3% 00%%0% 00%%0% 00%%0% 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q 4Q 2Q2Q4Q4Q2Q2Q4Q4Q2Q2Q4Q4Q2Q2Q4Q4Q 2Q2Q4Q4Q2Q2Q4Q4Q2Q2Q4Q4Q2Q2Q4Q4Q 2Q2Q4Q4Q2Q2Q4Q4Q2Q2Q4Q4Q2Q2Q4Q4Q 2013 2014 2015 2016 2013 2014 2015 2016 2013 2014 2015 2016 20210313 20210414 20210515 20210616 20210313 20210414 20210515 20210616 20210313 20210414 20210515 20210616 Under KRW 200M KRW 200M~400M Under KRW 200M KRW 200M~400M Under KRW 200M KRW 200M~400M UnderUnder KRW KRW 200M 200M KRWKRW 200M~400M 200M~400M UnderUnder KRW KRW 200M 200M KRWKRW 200M~400M 200M~400M UnderUnder KRW KRW 200M 200M KRWKRW 200M~400M 200M~400M KRW 400M~600M Over KRW 600 M KRW 400M~600M Over KRW 600 M KRW 400M~600M Over KRW 600 M KRWKRW 400M~600M 400M~600M OverOver KRW KRW 600 600 M M KRWKRW 400M~600M 400M~600M OverOver KRW KRW 600 600 M M KRWKRW 400M~600M 400M~600M OverOver KRW KRW 600 600 M M Source: RTMS
26 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
changes in the ratio of transactions of homes in other price ranges. - As such, the increase in the ratio of transactions involving low-priced homes was attributable to the accumulated fatigue among renters resulting from the rising jeonse prices, and the increase in transactions of row houses and multi-housing, units, which are relatively cheaper than apartments.
By Age Group The residential property transaction volume by age group in 2016 showed similar patterns as the previous year. The No. 1 buyers by age group were buyers in their 40s and 50s, who accounted for the 50% of the residential property sales transactions, followed by buyers in their 30s or younger and buyers over the age of 60.
○ In the case of the capital area, the sales transactions made by buyers in their 30s or younger and buyers in their 40s and 50s recovered dramatically in the second and third quarters, but the number plummeted again in the fourth quarter. - Buyers in their 30s or younger accounted for 29,000 transactions in 1Q, 42,000 transactions in 2Q, 49,000 transactions in 3Q and 35,000 transactions (as of the end of November), while buyers in their 40s and 50s accounted for 50,000 transactions in 1Q, 75,000 transactions in 2Q, 84,000 transactions in 3Q, and 60,000 transactions in 4Q (as of the end of November).
○ In the regions outside the capital area, the sales transaction volume increased in the second
Figure 1-23 Ratio of sales transactions by age group of buyer and region
Nationwide Capital area Non-capital area
10101%00%0% 10101%00%0% 10101%00%0% 10.8% 12.7% 101.014.0%4.%4% 12.5% 15.7% 11.1% 12.8% 10.180%.8%12.172%.7%141.419.4%9.%9%151.515.5%5.%5% 12.152%.5%151.51.5%1.%1%15.175%.7% 11.11%.1%12.182%.8%141.416.4%6.%6%151.514.5%4.%4% 808%08%0% 808%08%0% 808%08%0%
48.5% 606%06%0% 484.841.8%1.%1% 51.2% 606%06%0% 48.458%.5% 51.4% 606%06%0% 474.747.7%7.%7% 51.0% 51.521%.2%505.059.0%9.%9%515.154.1%4.%4% 51.541%.4%515.152.1%2.%2%515.158.1%8.%8% 51.501%.0%505.056.0%6.%6%515.150.1%0.%0%
404%04%0% 404%04%0% 404%04%0%
202%02%0% 373.73.7%3.%3% 202%02%0% 373.735.7%5.%5% 202%02%0% 373.731.7%1.%1% 323.234.2%4.%4%303.03.0%3.%3%292.929.9%9.%9% 323.235.2%5.%5%303.037.0%7.%7%303.030.0%0.%0% 323.234.2%4.%4%292.928.9%8.%8%292.927.9%7.%7%
0%0%0% 0%0%0% 0%0%0% 2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q 2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q 2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q2Q2Q2Q4Q4Q4Q 202102310313 202102410414 202102510515 202102610616 202102310313 202102410414 202102510515 202102610616 202102310313 202102410414 202102510515 202102610616 30s30s 30sand and andunder under under 40s~50s40s~50s40s~50s OverOverOver 60 60 60 OtherOtherOther 30s30s 30sand and andunder under under 40s~50s40s~50s40s~50s OverOverOver 60 60 60 OtherOtherOther 30s30s 30sand and andunder under under 40s~50s40s~50s40s~50s OverOverOver 60 60 60 OtherOtherOther Source: RTMS
27 and third quarters compared to the first quarter, similar to the capital area, but the level of increase was not very large. The sales transaction volume showed a noticeable downtrend.
- Buyers in their 30s or younger accounted for 31,000 transactions in 1Q, 34,000 transactions in 2Q, 35,000 transactions in 3Q and 28,000 transactions (as of the end of November), while buyers in their 40s and 50s accounted for 53,000 transactions in 1Q, 63,000 transactions in 2Q, 61,000 transactions in 3Q, and 49,000 transactions in 4Q (as of the end of November).
2) Jeonse and Monthly Rent Transaction Volumes
Summary Although the jeonse and monthly rent transaction volumes continually increased throughout the year, the total transaction volume as of the end of November 2016 was reported to be 1,341,000, which was slightly lower than the previous year (1,354,000).
○ The ratio of jeonse and monthly rent transaction volumes to total home lease transaction volumes were 55.8% and 44.2%, respectively, in 2015, and 54.7% and 45.3%, respectively, in 2016 (as of the end of November). As such, the portion of jeonse transactions decreased, while the portion of monthly rent transactions increased (1.1%p). Compared to the decrease in 2015 (-3.2%p) compared to 2014 (59.0% jeonse and 41.0% montly rent), the rate of decrease in jeonse transactions and the rate of increase in the monthly rent transactions has slowed down.
Figure 1-24 Trends in jeonse and monthly rent transactions by region
(Unit: ten thousand transactions) Nationwide Capital area Non-capital area
160160160 1461.476 1.1744 716.42.77 .124 7.2 120120120 60 60 60 1371.37 .133 7.3 1341.314 .113 4.1 50.500 .05 0.0 1401401134201.312 1.1133 212.34.12 .143 2.4 97.987 .899 77.92.87 .29 7.2 48.488 .84 8.8 100100100 91.951 .59 1.5 50 50 50 45.495 .94 5.9 46.416 .14 6.1 88.828 .288 88.8.28 .88 8.8 88.808 .08 8.0 43.493 .944 33.4.693 .64 3.6 120120120 60 60 60 44 44 44 54 54 54 65 65 65 45 45 45 80 80 80 37 37 37 40 40 40 100100100 61 61 61 27 27 2277 2 7 3237 3 3 33 41 41 41 23 23 2243 2 4 24 39 39 39 17 17 1187 1 8 2118 2 1 21 22 22 22 80 80 80 60 60 60 30 30 30
60 60 60 40 40 40 20 20 20 89 89 8879 8 7 87 87 87 87 40 40 40 83 83 83 82 82 82 62 62 6612 6 1 5681 5 8 6508 6 0 5660 5 6 56 73 73 73 49 49 49 27 27 2267 2 6 2256 2 5 2265 2 6 2266 2 6 2246 2 4 24 20 20 20 10 10 10 20 20 20
0 0 0 0 0 0 0 0 0 201210121200121201122200121302123200121403124200121504125200121605162016 201210121200121201122200121302123200121403124200121504125200121605162016 201210121200121201122200121302123200121403124200121504125200121605162016 JeonseJeonseJeonseMonthlyMonthly rentMonthly rent rent JeonseJeonseJeonseMonthlyMonthly rentMonthly rent rent JeonseJeonseJeonseMonthlyMonthly rentMonthly rent rent Source: RTMS
28 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
○ In the case of the capital area, the ratio of jeonse transactions to total home lease transactions was higher than the national average, with the ratio reported to be 56.1% as of the end of Nvoember in 2016. Meanwhile, the ratio of monthly rent transactions to total home lease transactions was 43.9%. As such, the ratio of jeonse transactions was higher than the national average, while the ratio of monthly rent transactions was lower than the national average. - As for the changes in the ratio of jeonse transactions to total home lease transactions, it decreased by 4.0%p from 2014 to 2015, and by 1.6%p from 2015 to 2016, indicating that the rate of decrease in jeonse transactions has slowed down.
○ As for the areas outside the capital area, the volume and ratio of jeonse and monthly rent transactions recorded as of the end of November in 2016 were fairly similar compared to the previous year, with no marked changes.
By Type of Monthly Rent The ratio of semi-jeonse transactions to total home lease transactions has continually increased from 16.3% in 2014 to 18.5% in 2015 to 20.2% in 2016 (as of the end of November), whereas the ratio of semi-monthly rent and monthly rent transactions to total home lease transactions has steadily decreased.
Figure 1-25 Trends in monthly rent transactions
(Unit: ten thousand transactions)
Nationwide Capital area Non-capital area
7070 70 65.615 .16 5.1 4545 45 41.411 .14 1.1 3030 30 60.670 .76 0.7 60.610 .16 0.1 37.347 .43 7.4 38.368 .63 8.6 7.97 .9 7.9 4040 40 4.3 24.204 .02 4.0 6060 60 54.504 .05 4.0 4.3 4.3 25 22.6 7.57 .5 7.5 7.27 .2 7.2 33.343 .43 3.4 4.04 .0 4.02 5 25 22.62 2.6 22.212 .12 2.1 3535 35 4.14 .1 4.1 20.7 20.72 0.7 3.63 .6 3.6 5050 4530.6 45.405 .046 5.1.06 .1 6.1 3.33 .3 3.3 43.64 3.6 26.6 27.257 .52 7.5 3.43 .4 3.4 3.23 .2 3.2 3030 3026.62 6.6 2020 1270.107 .01 7..1507 .512 7.7.52 .7 2.7 4.54 .5 4.5 4040 4.014 .1 4.1 2.3 2.62 .6 2.6 2525 252.3 2.3 1.81 .8 21..082 .0 2.0 45.1 1515 15 45.14 15..4211 .24 1.2 29.229 .22 69..2426 .42 6.4 3030 30 42.482 .84 2.8 2020 20 27.287 .82 7.8 39.369 .63 9.6 15.0 16.106 .01 6.0 25.265 .62 5.6 14.104 .01 4.105 .01 5.0 14.184 .81 4.8 32.362 .63 32..3263 .23 3.2 1515 15 21.4 1010 1110.8 11.181 .81 1.8 2020 20 20.290 .92 0.291 .42 1.4 11.81 1.8 1010 10 5 1010 10 5 5 5 5 5 8.2 8.4 9.89 .81 92..810 2 .01 2..1302 .31 2.3 5.5 7.67 .6 7.68 .2 8.2 3.5 3.8 3.9 4.34 .3 4..434 .4 4..144 .1 4.1 6.96 .9 76..397 .3 7.38 .4 8.4 3.43 .4 3..543 .5 43..454 .4 4.45 .5 5.5 3.5 3.53 .8 3.83 .9 3.9 0 0 0 0 0 0 0 0 0 20121012101221012012320123012430124012540125012650162016 20121012101221012012320123012430124012540125012650162016 20121012101221012012320123012430124012540125012650162016 semi-jeonsesemi-jeonsesemi-jeonsesemisemi-monthly-monthlysemi-monthly rent rent rent semi-jeonsesemi-jeonsesemi-jeonsesemisemi-monthly-monthlysemi-monthly rent rent rent semi-jeonsesemi-jeonsesemi-jeonsesemisemi-monthly-monthlysemi-monthly rent rent rent MonthlyMonthly rentMonthly rent rent MonthlyMonthly rentMonthly rent rent MonthlyMonthly rentMonthly rent rent Source: RTMS
29 ○ The semi-jeonse transaction volume in the capital area increased by 11,000 in 2014 and by 21,000 in 2015 compared to the previous year. The number of semi-monthly rent transactions made in 2016 as of the end of November was 82,000, which was higher than the transaction volume reported for the previous year (76,000), indicating a continuous increase in the volume of semi-monthly rent transactions in the capital area.
○ Also, in the case of the semi-monthly rent transaction volume, it appears to be increasing with the overall increase in the total monthly rent transaction volume; however, the ratio of semi-monthly rent transactions to total monthly rent transactions has actually been declining from 74.2% in 2014 to 70.9% in 2015 to 68.5% in 2016.
○ As for the areas outside the capital area, there were no significant changes in the semi- jeonse transaction volume, with the ratio of semi-jeonse transaction reported at 18.9% in 2014, 18.5% in 2015 and 18.5% in 2016. Also, the ratios of semi-monthly rent and monthly rent transactions remain fairly similar to the ratios reported for the previous year.
Jeonse by Price Range With the continuous increase in the jeonse prices, the number of jeonse transactions in the mid-to-high price range (KRW 200 million to KRW 400 million) and in the high price range (over KRW 400 million) has increased, whereas the number of jeonse transactions in the low price range (under KRW 100 million) and low-to-mid price range (KRW 100 million to KRW 200 million) has fallen.
○ This trend is noticeable in the Seoul National Capital Area, where the jeonse prices are high. The jeonse transactions under KRW 100 million accounted for 35.5% of the total jeonse transactions in 2016 as of the end of November, and this was a 4.7%p decrease from 2015 (40.2%). The jeonse transactions in the KRW 100 to 200 million range dropped 0.9%p from 29.7% in 2015 to 28.7% in 2016 (end of Nov.).
○ In contrast, the ratio of jeonse transactions in the mid-to-high and high ranges to the total jeonse transactions increased slightly. The ratio of jeonse transactions in the KRW 200 to 400 million range increased to 26.8% as of the end of November in 2016, which was a 3.5%p increase from the previous year, while the ratio of jeonse transactions over KRW 400 million to the total jeonse transactions reached 9.0%, which was a 2.1%p increase from the previous year.
30 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
○ In the case of regions outside the capital area, there were almost no jeonse transactions in the high price range. But similar to the capital area, the jeonse transactions under KRW 100 million decreased, while the ratios of jeonse transactions in the low-to-mid and mid-to- high price ranges to the total jeonse transactions increased markedly. - As for the changes from 2015 to 2016, the ratio of jeonse transactions in the low price range to total jeonse transactions decreased from 61.5% to 56.1%, while the ratio of jeonse transactions in the low-to-mid price range increased from 28.3% to 31.2% and the mid- to-high price from 9.7% to 12.0%. The ratio of jeonse transactions in the high price range increased slightly from 0.5% to 0.7%.
Figure 1-26 Jeonse transaction volume by price range and region
(Unit: ten thousand transactions)
Nationwide Capital area Non-capital area
100100100 80 80 80 40 40 40 1.51.51.561.61.6 2.0 3.03.03.0 2.02.0 4.0 4.0 9.59.59.5 4.0 1.51.51.5 80 80 80 11.121.121.2 1.61.61.6 2.92.92.9 11.191.1914.9164.164.6 4.64.6640.660 60 2.02.02.0 3.93.93.9 0.001. 0010. .00101 . 001. 01 0.004. 0040. .01402 . 102. 12 15.165.165.6 8.68.6180.6.120.120.2 0.002. 002. 02 25.235.235.3 0.80.80.8 0.107. 107. 17 26.276.7 10.150.15102..5182.182.8 4.54.54.5 1.01.011..031.31.81.812..852.52.5 60 60 60 26.7 16.16.16.1 5.9 1.3 24.274.2745.7255.255.5 13.13.13.1 5.9 5.96.6 2.92.92.9 19.149.149.4 6.6 6.66.57.27.27.2 24.204.204.0 40 40 40 20.210.210.1 13.220 20 20 6.5 6.5 7.47.47.4 18.128.128.218.3 13.2 13.2 21.271.271.7 18.3 18.3 7.57.57.5 40 40 40 16.166.166.6 14.124.124.2 52.2 52.2 5427.2497.497.944.7 20 20 20 20.210.210.118.4 20 20 44.7 443.7453.453.538.6 32.312.1 18.4 1187..4137.13177..317.1176..1106.0 20 38.6 38.6 3229..1259.25297..5247.4 26.4 1163..0143.4 30.390.390.9 2276..44 2262..4252.252.5 13.4 17.157.157.5 0 0 0 0 0 0 0 0 0 201210121012120122012230123012340124012450125012560126016 201210122100112120122200112230122300112340122400112450122500112560126016 201210122100112120122200112230122300112340122400112450122500112560126016 UnderUnder KRWUnder KRW 100M KRW 100M 100MKRWKRW 100~200MKRW 100~200M 100~200M UnderUnder KRWUnder KRW 100M KRW 100M 100MKRWKRW 100~200MKRW 100~200M 100~200M UnderUnder KRWUnder KRW 100M KRW 100M 100MKRWKRW 100~200MKRW 100~200M 100~200M KRWKRW 200~400MKRW 200~400M 200~400MOverOver KRWOver KRW 400M KRW 400M 400M KRWKRW 200~400MKRW 200~400M 200~400MOverOver KRWOver KRW 400M KRW 400M 400M KRWKRW 200~400MKRW 200~400M 200~400MOverOver KRWOver KRW 400M KRW 400M 400M Source: RTMS
31 Trends in the Housing Supply Market
1) Trends in New Housing Supply
Summary Amid the concerns of excess housing supply, construction permits and approvals were given for 765,000 housing units in 2015, which was an all-time high. In 2016, construction firms pushed for pre-construction parceling-out sales for one last time. Construction permits and approvals were given for 637,000 housing units in 2016 as of the end of November, which was slightly lowered compared to the same period in the previous year (667,000); however, due to the burden from the increase in housing supply, construction firms tended to adjust their housing construction project plans.
○ Permits and approvals The number of housing construction permits and approvals as of the end of 2016 (637,000) was lower than that of the same period in the previous year (667,000). The number of permits and approvals declined in the capital area compared to the previous year, while it increased by 33,000 in the non-capital area. Thus, if all of the housing construction projects, for which permits and approvals have been granted, commence and are completed, then the housing supply is expected to increase at a greater rate in the long term in the non-capital area than the capital area.
○ Pre-construction sales and construction commencement Meanwhile, the number of housing construction projects that commenced was similar to the number of permits and approvals given in the capital area. In contrast, the number of housing construction projects that commenced was substantially lower than the number of permits and approvals given in the non-capital area. It is expected that there will be multiple projects where construction will not commence despite having obtained the necessary permit and approval.
○ Construction completions As of the end of November in 2016, 450,000 housing units were built in the year. The number of completed housing constructions has been on the rise, due to the increase in the number of permits and approvals granted and the number of housing construction projects that commenced between 2014 and 2016.
32 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1- 27 Trends in housing supply nationwide (cumulative, from Jan. to Nov.) (Unit: ten thousand (buildings) units)
80 66.7 63.7 63.4 57.4 60 49.4 44.8 44.6 44.7 45.0 31.2 42.1 29.4 42.3 34.3 39.9 39.3 35.6 36.7 28.5 40 33.1 33.1 34.2 28.8 29.1 23.2 24.5 24.5 26.8 20.2 22.7 23.7 22.4 21.7 20.3 20.7 14.5 18.1 16.3 20.7 20 35.5 34.0 18.7 29.4 28.9 26.2 7.5 6.1 6.2 5.8 20.3 22.1 22.4 4.0 15.9 20.1 18.4 16.1 17.9 18.7 16.1 17.6 17.6 10.1 12.8 12.4 4.2 2.8 3.1 3.9 - 2.1 `12 `13 `14 `15 `16 `12 `13 `14 `15 `16 `12 `13 `14 `15 `16 `12 `13 `14 `15 `16 `12 `13 `14 `15 `16 Permits & licenses Construction commencement Pre-construction sales Construction completion Unclaimed supply Capital area Non-capital area
Note: The data are based on the cumulative value determined as of the end of November (excl. unclaimed supply) Source: MOLIT
○ Unclaimed supply The unclaimed supply (unsold housing units in pre-construction parceling-out sales) in 2015 was 50,000, which increased from 2014 by 10,000. However, the level of increase has dropped slightly in 2016, along with a slower rate of increase in the supply of housing units made available through pre-construction parceling-out sales.
Permits and Approvals Construction permits and approvals were given for 637,000 housing units nationwide as of November 2016, which was a 4.5% YOY decrease (667,000 as of November 2015).
○ The number of permits and approvals given as of November 2016 decreased by 17.1% in the capital area (294,000), and increased by 20.2% in the five metropolitan cities (98,00) and 198.9% in provinces outside the capital area (245,000). Based on this, it can be inferred that the decrease in the number of permits and approvals granted was mainly attributable to the trends observed in the capital area. More specifically, the number of permits and approvals granted decreased in Seoul (66,000), Incheon (19,000) and Gyeonggi (209,000) by 26.3%, 26.5% and 12.7%.
○ By supplier As of November 2016, the number of permits and approvals granted decreased by 4.3% for the private sector (597,000) and by 7.9% for the public sector (40,000).
33 ○ By size While the number of permits and approvals granted decrease for most home sizes in the capital area, it increased by 12.8% for homes that were 135㎡ in size or bigger. In the five metropolitan cities and provinces, the number of permits and approvals granted increased for most home sizes.
Pre-construction Sales The number of housing units made available through pre- construction parceling-out sales in 2016, as of November, was 423,000, which was a 14.3% YOY decrease (494,000 in 2015 as of November).
○ Pre-construction sales decreased nationwide by 15.9% in the capital area (221,000), 11.8% in the five metropolitan cities (57,000) and 12.9% in provinces outside the capital area (146,000). - While the housing supply made available through pre-construction sales declined in most regions, it increased in Seoul (9.4%), Gwangju (59.1%), Gangwon (49.8%), and Gyeongnam (25.3%).
Construction Commencement In 2016, as of November, construction projects commenced for 574,000 housing units, which was a 9.5% YOY decrease (634,000 in 2015 as of November).
○ Commencement of housing construction projects declined by 15.2% in the capital area (289,000) and by 5.7% in provinces outside the capital area (206,000), while it increased by 4.5% in the five metropolitan cities (79,000). - While project commencement decreased in most regions, it increased in Gwangju (15,000) and Busan (30,000) by 73.9% and 4.8%, respectively.
○ By supplier In 2016, as of November, the number of housing construction projects initiated by the private sector (536,000) decreased by 16.4% compared to the same period in the previous year, and by 20.7% for the public sector (38,000).
○ By size In the capital area, five metropolitan cities, and provinces outside the capital area, the construction projects for homes smaller than 60㎡ that were started dropped the greatest in number among all the different home sizes. In particular, there was a 27.9% decrease in the projects that were commenced for the construction of homes that were
34 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
smaller than 40㎡ in the provinces outside the capital area.
Construction Completions In 2016, as of November, the number of housing units, of which the construction was completed, was 450,000, which was a 14.5% YOY increase (393,000 units in 2015 as of November).
○ Completion of housing construction projects increased in the capital area (224,000), five metropolitan cities (69,000), and provinces outside the capital area (157,000) by 27.0%, 10.3% and 2.1%, respectively. - The rate of increase in Seoul (72,000) and Gyeonggi (138,000) was 22.7% and 35.2%, respectively, and contributed to the increase in total construction completions nationwide.
○ The completion of housing construction projects by the private sector (369,000) increased by 11.5%, while it increased by 30.9% in the case of the public sector (82,000).
○ By size Completion of housing construction projects for homes smaller than 40㎡ increased nationwide by 51.0% in total, while it increased by the largest amount in the capital area at 61.2%
35 Table 1-8 Trends in housing supply by region (Unit: thousand units) 2015 2016 Ratio 4/4 against Cumu Category Cumulative total, long- 1/4 2/4 3/4 lative 계 1/4 2/4 3/4 as of Nov term total, as average of Nov. Nation- 118.8 181.3 240.1 225.2 667.2 765.3 163.0 192.3 164.2 636.8 (-4.5) 1.19 wide Capital 61.3 99.3 133.9 114.3 354.7 408.8 79.2 84.9 71.5 293.9 (-17.1) 1.13 area Five metro- 13.3 18.3 27.3 36.9 81.8 95.8 21.2 36.2 23.0 98.3 (20.2) 1.26 politan
rmits and approvals and rmits cities
Pe Provinc- 44.1 63.8 78.9 74.0 81.8 260.8 62.6 71.1 69.7 244.6 (198.9) 1.22 es Nation- 58.3 160.5 117.6 189.6 493.9 525.9 81.9 127.9 115.0 423.0 (-14.3) 1.22 wide Capital 24.5 80.4 65.9 101.5 262.4 272.3 37.8 61.4 68.5 220.7 (-15.9) 1.41 area Five metro- 7.8 24.6 14.5 22.2 64.2 69.0 11.0 19.0 13.5 56.6 (-11.8) 0.85 politan cities e-constructionsales
Pr Provinc- 26.1 55.5 37.2 65.9 167.4 184.6 33.0 47.5 33.0 145.8 (-12.9) 1.17 es Nation- 110.5 178.3 173.4 254.5 634.3 716.8 117.7 181.8 150.9 573.8 (-9.5) 1.11 wide Capital 53.2 93.0 97.8 139.8 340.2 383.9 54.8 90.2 84.1 288.5 (-15.2) 1.21 area Five metro- 14.9 21.8 19.0 27.7 75.9 83.3 21.1 23.5 15.4 79.4 (4.5) 0.94 politan cities
nstruction commencement nstructioncommencement Provinc- 42.4 63.5 56.6 87.1 218.3 249.6 41.8 68.1 51.5 205.8 (-5.7) 1.04
Co es Nation- 91.1 98.4 123.1 147.5 393.0 460.2 100.4 142.3 122.8 450.1 (14.5) 1.12 wide Capital 35.3 49.5 61.8 57.1 176.1 203.7 46.7 74.6 61.6 223.6 (27.0) 1.13 area Five metro- 19.7 16.6 13.8 25.0 62.6 75.1 14.2 26.1 18.5 69.1 (10.3) 1.02 politan cities nstruction completion nstructioncompletion
Co Provinc- 36.2 32.4 47.4 65.4 154.2 181.3 39.5 41.6 42.8 157.4 (2.1) 1.16 es Note: “Long-term average” refers to the cumulative total at the end of November each year from 2011 to 2016, and the number in brackets is the rate of YOY change Source: MOLIT
36 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Table 1-9 Trends in housing supply by capital area and major cities
(Unit: thousand units) Permits and approvals Pre-construction sales 2015 2016 Ratio 2015 2016 Ratio Region gainst gainst 4/4, long- 4/4, long- 1/4 2/4 3/4 Total 1/4 2/4 3/4 Nov. 1/4 2/4 3/4 Total 1/4 2/4 3/4 Nov. Nov. term Nov. term average average 29.7 65.6 23.2 47.5 Seoul 16.1 20.2 35.2 101.2 15.8 20.7 19.6 0.9 4.3 10.6 7.9 46.0 10.5 12.6 14.1 1.3 88.9 (-26.3) 43.4 (33.4) 6.2 19.2 10.9 13.4 Incheon 3.9 5.6 14.9 30.6 3.0 3.7 8.1 0.9 2.1 7.3 7.0 27.2 1.1 2.5 6.6 0.9 26.1 (-26.5) 27.0 (-45.9) 78.4 209.2 67.4 159.8 Gyeonggi 41.2 73.5 83.8 276.9 60.4 60.5 43.8 1.5 18.0 62.5 51.1 199.0 26.2 46.3 47.8 1.5 239.7 (-12.7) 192.0 (-10.2) 12.2 30.9 6.8 16.7 Busan 5.4 6.2 9.7 33.5 8.9 12.3 6.6 1.1 1.6 8.9 6.8 24.2 3.2 6.0 3.9 0.7 30.2 (31.5) 22.2 (-25.2) 14.0 20.9 4.0 13.2 Daegu 2.4 5.5 27.1 27.1 2.5 10.4 5.0 1.5 1.8 5.7 4.5 16.0 4.9 3.4 2.8 0.8 19.5 (25.8) 14.6 (1.7) 4.6 20.0 2.0 11.5 Gwangju 1.2 2.7 14.7 14.7 3.1 7.2 4.3 1.6 1.8 2.7 1.9 8.4 2.1 4.3 3.8 1.1 12.4 (81.3) 7.2 (51.4) 2.0 11.3 2.8 8.0 Daejeon 3.1 1.3 1.7 8.0 1.4 3.5 1.9 1.3 0.4 5.5 0.8 9.4 0.7 1.9 2.8 1.0 7.8 (7.1) 9.4 (-24.3) 4.1 15.3 6.7 7.2 Ulsan 1.3 2.6 4.5 12.5 5.4 2.8 5.3 1.5 2.1 1.8 0.4 11.1 0.2 3.4 0.2 0.8 11.9 (43.1) 10.7 (-5.5) Region Construction commencement Construction completion 35.0 72.8 16.2 72.2 Seoul 13.2 19.6 28.9 96.8 16.7 21.8 18.5 1.1 12.6 16.8 19.1 67.8 19.3 20.8 22.1 1.2 84.7 (-14.0) 58.9 (22.7) 12.1 14.2 3.2 13.3 Incheon 4.3 6.3 8.3 31.0 2.6 2.7 5.4 0.8 2.6 7.1 3.8 19.7 1.8 6.8 2.7 0.7 26.1 (-45.5) 15.1 (-11.4) 92.8 201.5 37.8 138.1 Gyeonggi 35.6 67.2 60.6 256.1 35.5 65.6 60.2 1.5 20.1 25.6 38.9 122.3 25.6 47.0 36.7 1.4 229.4 (-12.2) 102.1 (35.2) 5.9 30.2 9.7 17.0 Busan 5.5 10.4 8.5 30.3 8.7 9.8 5.5 1.1 5.8 6.3 3.1 25.0 2.9 3.8 7.3 0.7 28.8 (4.8) 21.3 (-20.1) 7.3 13.6 8.7 27.2 Daegu 3.2 3.5 4.6 18.6 5.0 3.4 3.6 1.0 5.3 2.6 4.8 21.4 6.7 10.4 5.0 2.2 15.5 (-12.5) 15.8 (72.1) 3.3 14.8 1.3 11.3 Gwangju 1.6 1.9 3.4 10.2 3.1 5.6 3.3 1.1 3.8 0.6 2.9 8.6 2.5 5.4 2.9 1.2 8.5 (73.9) 7.8 (44.1) 4.1 7.9 2.2 7.8 Daejeon 2.1 3.2 0.8 10.2 3.1 0.8 1.2 0.9 1.1 3.4 0.7 7.4 1.6 3.2 2.2 0.9 9.4 (-15.4) 7.2 (8.0) 7.0 12.9 3.0 5.8 Ulsan 2.5 2.8 1.7 14.0 1.3 4.0 1.7 1.3 3.6 3.6 2.4 12.7 0.6 3.4 1.1 0.8 13.7 (-6.0) 10.5 (-44.7) Note: 1) Indicated under “November” is the cumulative total from Jan. to Nov. 2) Note: “Long-term average” refers to the cumulative total at the end of November each year from 2011 to 2016, and the number in brackets is the rate of YOY change Source: MOLIT
37 2) Trends in Unclaimed Supply
Unclaimed Supply The number of unsold homes from the pre-construction parceling- out sales (unclaimed supply) in 2016, as of November, was 58,00, which was a 15.8% YOY increase (50,000 units as of Nov. 2015).
○ It decreased by 31.4% in the capital are (18,000), while it increased in the five metropolitans and the provinces outside the capital area by 33.4% and 72.6%. - As for the capital area, the unclaimed supply increased in Seoul, whereas a 34.0% YOY decrease was observed in the Gyeonggi area (14,000), which ultimately contributed to the decline in the unclaimed supply in the capital area.
○ By size The unclaimed supply of homes that are smaller than 60㎡ increased in the capital area, five metropolitan cities and provinces outside the capital area. Of particular note, the highest increase was observed in the five metropolitan cities, which recorded a 193.3% YOY increase.
Table 1-10 Trends in unclaimed supply
(Unit: thousand units) 2015 2016 Region 4/4 1/4 2/4 3/4 1/4 2/4 3/4 Nov. Nov. Nationwide 28.9 34.1 32.5 61.5 49.7 53.8 60.0 60.7 57.6 (15.8) Capital area 14.2 16.1 14.5 30.6 26.6 23.3 23.3 19.0 18.2 (-31.4) Seoul 1.1 0.6 0.3 0.5 0.2 0.8 0.4 0.3 0.3 (11.2) Incheon 2.8 2.5 2.8 4.2 2.8 3.5 3.2 2.4 3.6 (27.4) Gyeonggi 10.3 12.9 11.5 25.9 21.8 19.0 19.7 16.3 14.4 (-34.0) Five metropolitan cities 2.6 2.1 2.5 6.1 2.9 5.2 5.7 5.1 3.9 (33.4) Busan 1.3 1.0 1.3 1.3 1.1 1.3 1.6 1.3 1.1 (3.4) Daegu 0.5 0.0 0.1 2.4 0.1 1.8 1.2 1.4 1.0 (757.9) Gwangju 0.1 0.2 0.3 0.7 0.3 0.8 1.1 1.1 0.7 (131.9) Daejeon 0.5 0.8 0.8 1.2 1.1 0.8 0.8 0.7 0.6 (-43.2) Ulsan 0.3 0.1 0.1 0.4 0.4 0.6 1.0 0.6 0.5 (39.5) Provinces 12.1 15.9 15.5 24.8 20.2 25.4 31.0 36.6 34.9 (72.6)
Note: The number in brackets is the YOY rate of change Source: MOLIT
38 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
- In the provinces outside the capital area, there was a 175.8% YOY increase in the unclaimed supply of homes that are larger than 85㎡.
Unclaimed Supply After Construction Completion In 2016, as of November, the number of homes that remained unsold even after the construction projects were complete was 10,2000, which was a 2.9% YOY decrease (10,500 units in 2015 as of November).
○ It decreased in the five metropolitan cities (700, -36.5%) and the capital area (5,100, -22.5%), and increased in the provinces outside the capital area (4,400, 55.3%). - In the capital area, the unclaimed supply decreased in Seoul, Incheon and Gyeonggi by 30.3%, 65.3% and 20.4%, respectively. - Among the five metropolitan cities, the unclaimed supply dropped most significantly in Ulsan, with only 14 unclaimed homes after construction completion. In Daegu, there has been no unclaimed supply after construction completion since Sept. 2015.
Table 1-11 Trends in unclaimed supply after construction completion
(Unit: thousand units) 2015 2016 Region 4/4 1/4 2/4 3/4 1/4 2/4 3/4 Nov. Nov. Nationwide 13.5 12.6 11.5 10.5 10.5 10.5 10.8 10.7 10.2 (-2.9) Capital area 8.7 15.7 7.5 6.6 6.6 7.0 6.5 5.9 5.1 (-22.5) Seoul 0.1 0.2 0.1 0.2 0.2 0.2 0.1 0.1 0.1 (-30.3) Incheon 2.1 4.3 2.2 2.0 4.3 2.0 1.9 1.5 1.5 (-65.3) Gyeonggi 6.4 11.1 5.3 4.4 4.4 4.9 4.5 4.3 3.5 (-20.4) Five metropolitan cities 1.3 2.1 0.9 0.9 1.0 0.6 0.6 0.7 0.7 (-36.5) Busan 0.6 0.8 0.3 0.5 0.6 0.2 0.2 0.2 0.3 (-54.6) Daegu 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 - Gwangju 0.1 0.4 0.2 0.2 0.2 0.2 0.2 0.2 0.2 (-7.3) Daejeon 0.4 0.7 0.3 0.2 0.2 0.1 0.2 0.2 0.2 (-3.2) Ulsan 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0 0.0 (-76.7) Provinces 3.6 6.9 3.1 3.0 2.8 2.9 3.6 4.1 4.4 (55.3)
Note: The number in brackets is the YOY rate of change Source: MOLIT
39
Calculation Method There are two ways to calculate the number of move-in ready homes: 1) Estimation of the number of homes expected to be built based on the number of homes, for which the construction projects have begun, using a simple equation; and 2) Estimation of the number of homes expected to be built by examining the expected completion dates for housing construction projects.
○ Simple estimation In the case of non-apartments such as detached homes, multi-housing and row houses, it typically takes about a year for the construction work to finish, whereas it takes about 3 years for large apartment complexes to be built. Thus, an estimation can be made up to 3 years.
○ Research-based estimation The estimation method involving an examination of the expected completion date is highly reliable in the short term, but it is accompanied by high variability resulting from external environmental factors in the short term. Thus, there is no significant difference compared to the aforementioned method. In principle, there is a high probability that the estimated number of move-in ready homes is lower than the actual number of move-in ready homes because the former excludes the housing supply assigned to the reconstruction association members.3)
A Comparison with the Number of Move-in Ready Apartments The result of the simple estimation (345,000 in 2017 and 497,000 in 2018) is 59,000 higher than the result of the research-based estimation (362,000 in 2017 and 421,000 in 2018), which is about a 30,000- unit difference in a year.
3) Real Estate 114 examines the number of move-in ready apartments, based on the number of housing units and scheduled construction completion date indicated on the pre-construction parceling-out sales notice posted on Apt2you (subscription application site) run by the Korea Financial Telecommunications and Clearings Institute (KFTC). The number of homes for which the construction is set to be completed is aggregated based on the expected construction completion date, provided that the actual construction completion of the apartment complexes that are set to be built in the offing (within 4 months of the investigation) by the scheduled date is examined in order to make the necessary corrections. However, only the homes sold through the ordinary pre-construction parceling-sales are included on Apt2you (excludes the number of homes assigned to the reconstruction association members) and this accounts for only part of the total number of newly supplied homes.
40 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
- Although there are no significant differences in the results between the estimation methods, in the case of Gyeonggi, there is a marked difference in the results by year and estimation method, with the total move-in ready homes estimated for 2017 and 2018 to be 6,800 units higher using the simple estimation method than the research-based method.
Figure 1-28 A comparison of move-in ready homes
of move-in ready homes in 2017 of move-in ready homes in 2018
(ten thousand units)(ten thousand units) (ten thousand units)(ten thousand units) 14 14 25 25 12 12 20 20 10 10 8 8 15 15 6 6 10 10 4 4 5 5 2 2 0 0 0 0 Jeju Jeju Jeju Jeju Ulsan Ulsan Seoul Seoul Ulsan Ulsan Seoul Seoul Busan Busan Busan Busan Daegu Daegu Daegu Daegu Sejong Sejong Sejong Sejong Incheon Incheon Incheon Incheon Daejeon Daejeon Daejeon Daejeon Jeonbuk Jeonbuk Jeonbuk Jeonbuk Gwangju Gwangju Gwangju Gwangju Gyeonggi Gyeonggi Jeonnam Jeonnam Gyeonggi Gyeonggi Jeonnam Jeonnam Gangwon Gangwon Gangwon Gangwon Chungbuk Chungbuk Chungbuk Chungbuk Chungnam Chungnam Chungnam Chungnam Gyeongbuk Gyeongbuk Gyeongbuk Gyeongbuk Gyeongnam Gyeongnam Gyeongnam Gyeongnam Research-based estimationResearch-basedSimple estimation estimationSimple estimation Research-based estimationResearch-basedSimple estimation estimationSimple estimation
41 Land Market
Lee Seokhee
Long-term National Trends
1) Trends in Land Value Index
Trends in Land Value index has been rising overall. More specifically, the real land value index had decreased until 2013 and began showing an uptrend since 2014.
○ The land value index recorded 95.19 in Jan. 2011, and showed steadiness* between 2012 and 2013; however, the land value has been rising steadily to 105.11 by Nov. 2016, which is a 6.9% increase from Jan. 2014. * The monthly average rate of change in land value was 0.090% between 2011 and 2013 and 0.177% between 2014 and 2015, while it recorded 0.049% between Aug. 2012 and Jan. 2013, characterized by a steady trend, and 0.032% between July and Sept. 2013.
Figure 1-29 Land value index and rate of Figure 1-30 Land value index and real land change in land value value index
(%) 110 105 0.3 105 100 0.2
95 0.1 100
90 0.0 95 (Land value index 2014.11=100) (Land value index : 2014.11=100) (Real land value index: 2014.11=100) 85 -0.1 90 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Rate of change in land value Land value index Real land value index Land value index Source: MOLIT Source: MOLIT
42 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
○ The real land value, which takes into account the consumer price index, has been on a continuous decline since Jan. 2011, and recorded the lowest point in Aug. 2011 at 99.34. Since 2014, however, it has been rising steadily (Nov. 2014=100).
○ It reached 102.73 in Nov. 2016, which was the highest point in 5 years (101.37 in Jan. 2011), and this was a 1.48% increase from Jan. 2014.
Real Land Value Index by Zoning Following the financial crisis, the real land value index of commercial zones exhibited the sharpest decline, and has been recovering slowly since then, whereas the land value of residential zones has been rising the most quickly.
○ The real land value index of residential zones has been rising most rapidly since 2014*, and this is deemed to be due to the relatively surge in housing prices resulting from the lowered benchmark interest rate and the fact that houses are increasingly perceived as real estate property that yields a return. * The real land value index of residential zones plunged from 101.37 in Jan. 2011, and has since recovered most quickly out of all other zones. It recorded 103.45 in Nov. 2016, which was the highest real land value index compared to other zones.
○ The real land value index of commercial zones has dipped most markedly, and has been recovering at a slow rate*, and this is deemed to be due to the prolonged economic recession. * It dropped most significantly from 102.17 in Jan. 2011 to 100 in Nov. 2014, and has been making a sluggish recovery to 102.12 as of Nov. 2016.
○ The level of increase in the real land value index is the lowest for industrial zones (101.50 in Nov. 2011), and this is attributed to the slowdown in the manufacturing industry caused by the economic recession.
○ The real land value index of the planned management zone remained steady from Jan. 2011 (99.71) until 2014; however, it rapidly increased compared to commercial, industrial and green zones since 2015 and recorded 102.83 in Nov. 2016.
43 Figure 1-31 Real land value indices of major zoning types
110044 110044 110033 110033 110022 110022 110011 110011 110000 110000 9999 9999 9988 (Real(Real landland valuevalue indexindex :: 2014.11=100)2014.11=100) 9988 (Real(Real landland valuevalue indexindex :: 2014.11=100)2014.11=100) 9977 9977 22001111 22001122 22001133 22001144 22001155 22001166 22001111 22001122 22001133 22001144 22001155 22001166 ResidentialResidential zonezone CommercialCommercial zonezone IndustrialIndustrial zonezone PlannedPlanned managementmanagement zonezone GreenGreen zonezone
Source: MOLIT
2) Trends in Land Transaction Volume
The land transaction volume (based on total number of lots) has generally been on the rise since 2011, with an increase in transactions centering on the cities outside the capital area after 2011 and on the capital after 2013.
○ The land transaction volume (lot-based) has increased steadily since 2013; however, it remained steady after reaching its peak in April 2015 (292,000 transactions), and recorded 274,000 in Nov. 2016. The land transaction volume calculated based on the total land area subject to the transactions has remained steady.
○ The land-only transaction volume calculated based on total number of lots and total land area has remained steady for 5 years. In terms of the total land area, there have been transactions of around 150k㎡ of land in total, on average, a month.
○ The ratio of land transactions (lot-based) in provinces outside the capital area was around 40~50% between 2011 and 2015, but it became to decline in the second half of 2016 and dropped to 38.6% in Nov. 2016, which is lower than that of the capital area. * In the capital area, the ratio of land transactions has continually risen since 2013 and has been around 40% from 2015 onwards.
○ As for the ratio of land-only transaction s by region, it has remained steady without no significant changes.
44 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1-32 Land transaction volume (3MA) Figure 1-33 Land-only transaction volume (3MA)
300,000 200,000
200,000 100,000 100,000
0 0 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 2016 Land transaction volume (number of lots) Land transaction volume (number of lots) Land transaction volume (area: 1,000㎡) Land transaction volume (area: 1,000㎡) Source: MOLIT Source: MOLIT
Figure 1-34 Ratio of land transaction volume Figure 1-35 Ratio of land-only transaction by region (lot-based) volume by region (lot-based)
60% 100%
80% 40% 60%
40% 20% 20%
0% 0% 2011 2012 2013 2014 2015 2016 2011 2012 2013 2014 2015 Capital area Other metropolitan cities Capital area Other metropolitan cities Other provinces Other provinces Source: MOLIT Source: MOLIT
The land transactions (lot-based) by foreigners have generally been on the rise, and have doubled from 2010 to 2014. On the other hand, the land transactions involving foreigners in Jeju-do have been declining since 2015.
○ While the land transactions (lot-based) involving foreigners have been increasingly steadily since 2010, and the transaction volume surged in all regions starting in 2014*. * The monthly average land transactions involving foreigners from 2010 to 2013 increased steadily from 732 to 865, but it skyrocketed to 1,286 in 2014, 1,645 in 2015 and 1,747 in 2016.
○ In Jeju, the land transactions involving foreigners have been continually rising since 2010 after the introduction of the real estate investment-based immigration scheme; however, the monthly average transaction volume has been declining after reaching its peak in 2014, and recorded 107 in 2016.
45 * The monthly average transaction volume in Jeju was 21 in 2010, but it rose to 63 in 2012 and 155 in 2014, and dropped to 142 in 2015 and 107 in 2016.
Figure 1-36 Land transactions involving Figure 1-37 Land transactions involving foreigners (lot-based) foreigners (area-based)
2,500 2,000
2,000 1,500 1,500 1,000 1,000 500 500 0 0 01040710010407100104071001040710010407100104071001040710 01040710010407100104071001040710010407100104071001040710 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 Seoul IncheonㆍGyeonggi Seoul IncheonㆍGyeonggi Other metropolitan cities Other provinces Other metropolitan cities Other provinces Note: 3-month moving average (3MA) Note: 3-month moving average (3MA) Source: MOLIT Source: MOLIT
Figure 1-38 Land transactions involving Figure 1-39 Land transactions involving foreigners (lot-based) in Jeju foreigners (area-based) in Jeju
400 600 500 300 400 200 300 200 100 100 0 0 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 01 04 07 10 2010 2011 2012 2013 2014 2015 2016 2010 2011 2012 2013 2014 2015 2016 Land only Complex real estate property Land only Complex real estate property Note: 3-month moving average (3MA) Note: 3-month moving average (3MA) Source: MOLIT Source: MOLIT
46 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Trends in Land Market by Region
1) Trends in Land Value
Trends in Land Value rose in 2014, 2015 and 2016, at a growing rate of increase. Of particular note, the rate of increase in land value has been the highest in Jeju.
○ In 2016, the rate of increase in land value was higher in non-capital areas than the capital area and in the metropolitan cities outside the capital area than the provincial area. However, the rate of increase in land value in metropolitan cities outside the capital area was slightly lower compared to the previous years. * In the case of the capital area, the rate of increase was around 1.6% (Incheon)~2.7% (Seoul), whereas it was around 1.8% (Chungnam)~ 7.9% (Jeju) in the case of the provincial areas, and 2.2% (Ulsan)~3.8% (Busan) in the case of metropolitan cities (excl. Sejong). * In Daegu, Incheon, Gwangju, and Ulsan, the rate of increase in land value decreased from 2015 to 2016.
Figure 1- 40 Rate of change in land value by city and province % % % % % 5% % % . 8 . 7 . 3 . 0 . 3 . 6 % % % % % % % 3 3 4 4 4 % %
5% % 3 . 2 % % %
4% % % % . 8 . 7 . 0 . 3 . 3 . 9 3 . 6 . 7 . 7 % . 7 % % % . 6 % 3 3 4 4 4 % . 5 % 2 % 3 . 5 . 5 . 2 . 4 2 2 % 2 % % % %
4% % % % 2 . 2 % 2 . 2 . 1 % 2 2 . 9 3 2
3% . 0 . 7 . 7 % . 7 % % . 6 % 2 . 5 . 8 2 . 8 2 2 . 5 . 5 % . 4 . 7 2 2 2 . 6 % 2 % % . 6 % 2 . 2 % 2 1 1 . 2 . 1 % 2 2 2 1
3% . 0 1 1 . 2 2 . 1 . 8 2 . 8 2
2% % . 7 2 . 6 % . 6 1 1 1 1 1 1 1 . 2 2% . 1 1
1% 1 1% 0% 0% Nationwide Seoul Busan Daegu Incheon Gwangju Daejeon Ulsan Jeju Nationwide Seoul Busan Daegu Incheon Gwangju Daejeon Ulsan Jeju 2014 (Dec. 2013~Nov. 2014) 2015 (Dec. 2014~Nov. 2015) 2016 (Dec. 2015~Nov. 2016) 2014 (Dec. 2013~Nov. 2014) 2015 (Dec. 2014~Nov. 2015) 2016 (Dec. 2015~Nov. 2016) 7.9% 7.9% 5.4% 5.4% 3.3% 3.3% % % % % % % % 3% % % % % % % % % % % % % % . 4 . 7 . 5 . 3 . 3 . 3 . 2 3% . 2 % % % % % % % . 1 . 0 % . 0 2 2 2 2 2 2 2 . 4 . 5 . 3 . 7 . 3 . 3 . 0 2 % . 2 . 2 % % % % % % 2 % 2 . 1 . 0 2 . 8 % . 8 . 0 . 8 2 2 2 2 2 2 . 7 2 2 . 0 2 % % % % . 6 % 2 2 % 1 . 6 . 6 2 1 . 8 1 % . 8 1 . 5 . 8 . 7 2 % . 4 %
2% 1 . 6 % 1 1 1 . 6 . 6 . 3 1 1 1 1 . 5 . 3 % 1 . 4
2% 1 . 1 1 1 1 . 3 1 1 . 3 1 1 . 1 1 1 1% 1 1%
0% 0% GyeonggiGyeonggi GangwonGangwon ChungbukChungbuk ChungnamChungnam JeonbukJeonbuk JeonnamJeonnam GyeongbukGyeongbuk GyeongnamGyeongnam JejuJeju 20142014 (Dec.(Dec. 2013~Nov.2013~Nov. 2014)2014) 20152015 (Dec.(Dec. 2014~Nov.2014~Nov. 2015)2015) 20162016 (Dec.(Dec. 2015~Nov.2015~Nov. 2016)2016) Source: MOLIT
47 ○ Sejong and Jeju recorded the highest rate of increase in land value in the nation; Sejong has been recording 4% for 3 consecutive years, while it has been rising persistently in Jeju. * The rate of increase in land value in Sejong was 4.3% in 2014, 4.0% in 2015, and 4.3% in 2016. * The rate of increase was the highest in Jeju in 2016 at 7.9%, which was triple the national average.
2) Zoning-based4) Trends5) in Rate of Change
Nationwide Trends The rate of increase in land value by zoning in the past 3 years has generally been rising nationwide, but the rate of increase in the land value of industrial zones was at its lowest in 3 years in 2016.
○ The rate of increase in the land value of residential zones was the highest among the zoning types, and it reached its peak (2.84%) in 2016.
○ The land value of commercial zones increased by 2.25%, which was largely attributable to the increase observed in the non-capital area (3.09%) rather than the capital area (1.85%).
○ The land value of industrial zones rose by 1.57%; it increased by 1.40% in the non-capital area, which was the lowest rate of increase.
○ The land value of planned management zones increased by 2.54%, with the lowest rate of increase observed in the capital area.
4) Land use zonings are divided into urban zone, management zone, agricultural zone and natural reserve zone, and the urban zone is further subdivided into residential zone, commercial zone and industrial zone, while the management zone is subdivided into planned management zone, production green zone, and natural reserve zone. 5) In this case, the trends in the land value index are analyzed centering on the urban zone (residential, commercial industrial, and green zones) and the planned management zone, which is managed under similar regulations as the urban zone.
48 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1- 41 Rate of change in land value by reigon and zoning
4.0% Nationwide Metropolitan cities Capital area Rural areas
3.0%
2.0%
1.0%
0.0% Residential zone Commercial zone Industrial zone Green zone Planned management zone
Table 1-12 Rate of change in land value by region and zoning
(Unit: %) Planned Residential zone Commercial zone Industrial zone Green zone Region management zone 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 Nationwide 2.21 2.49 2.84 1.34 1.77 2.25 1.74 1.91 1.57 1.24 1.83 2.12 1.86 2.04 2.54 Metropolitan 2.52 2.75 3.04 1.67 1.98 2.55 1.91 2.09 1.74 1.51 2.12 2.06 2.49 1.98 2.45 cities Capital area 2.20 2.35 2.66 1.37 1.41 1.85 1.71 2.01 1.74 0.87 1.34 1.68 1.47 1.70 2.28 Rural areas 2.27 2.92 3.35 1.27 2.54 3.09 1.77 1.81 1.40 1.75 2.43 2.68 2.21 2.33 2.75
Note: The data are based on the YOY rate of change determined at the end of November Source: MOLIT
The rate of increase in land value in 2016 was very high in Jeju, Sejong, and Busan.
○ In the case of residential zones, the rate of increase in land value was the highest in Jeju (7.86%), followed by Sejong (4.28%), Busan (4.16%), Daegu (4.07%), Daejeon (3.94%), and Gangwon (3.55%), and it was the lowest in Incheon (2.01%) and Chungbuk (2.19%).
○ As for commercial zones, the rate of increase in land value was the highest in Jeju (5.98%), followed by Sejong (5.16%), Busan (5.13%), Daegu (3.21%), Daejeon (2.49%), and Gyeongnam (2.43%), and it was the lowest in Chungbuk (1.02%) and Incheon (1.24%).
○ As for industrial zones, the rate of increase in land value was the highest in Jeju (3.37%), Sejong (3.15%), Gwangju (2.58%), Seoul (2.05%), and Chungbuk (1.94%), and it was the lowest in Jeonbuk (0.19%), Ulsan (0.63%), Gyeongbuk (0.97%), and Gyeongnam (1.27%).
49 ○ In the case of green zone, the rate of increase in land value was the highest in Jeju (7.74%), followed by Sejong (3.88%), Daegu (3.31%), and Jeonnam (3.06%).
○ The rate of increase in land value of planned management zones was the highest in Jeju (9.56%), followed by Sejong (4.54%), Ulsan (2.77%), and Gangwon (2.72%).
Table 1-13 Rate of change in land value by region and zoning
(Unit: %) Planned Residential zone Commercial zone Industrial zone Green zone Region management zone 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 2014 2015 2016 Seoul 2.76 2.72 2.93 1.84 1.60 2.20 1.61 1.98 2.05 0.90 1.22 1.70 - - - Busan 2.21 2.82 4.16 1.91 3.29 5.13 1.94 1.82 1.68 1.67 2.79 2.81 - - - Daegu 3.09 3.98 4.07 1.62 2.83 3.21 4.18 3.64 1.93 2.68 3.50 3.31 - - - Incheon 1.17 2.19 2.01 1.16 1.45 1.24 1.99 2.14 1.55 0.75 1.21 0.92 1.12 0.93 1.26 Gwangju 1.20 2.70 2.45 0.24 1.73 2.25 1.49 2.35 2.58 1.36 2.95 2.97 0.25 2.14 2.37 Daejeon 1.68 2.98 3.94 0.85 1.90 2.49 1.82 2.51 1.91 2.21 2.73 1.93 -0.16 1.82 2.53 Ulsan 2.57 2.74 2.86 0.83 2.11 2.23 0.89 1.33 0.63 1.12 1.87 1.99 0.68 2.44 2.77 Sejong 2.90 2.08 4.28 0.91 10.07 5.16 0.51 1.30 3.15 7.31 3.97 3.88 5.75 3.87 4.54 Gyeonggi 1.47 1.77 2.33 0.43 0.96 1.26 1.62 1.95 1.61 0.87 1.37 1.78 1.49 1.75 2.34 Gangwon 1.86 3.12 3.55 0.63 1.85 2.23 0.51 1.27 1.31 2.02 2.56 2.71 2.30 2.47 2.72 Chungbuk 1.99 2.30 2.19 0.34 1.21 1.02 1.36 2.07 1.94 1.13 1.52 1.48 2.43 2.01 2.28 Chungnam 2.57 2.04 2.30 0.29 0.60 1.85 1.25 1.18 1.49 0.58 1.20 1.56 1.33 1.36 1.79 Jeonbuk 1.77 2.66 2.41 0.58 2.08 2.00 0.79 1.25 0.19 1.71 2.06 1.97 1.65 1.77 2.02 Jeonnam 1.99 3.58 2.84 1.23 2.91 2.04 1.37 0.96 1.33 1.66 3.13 3.06 1.82 2.24 2.51 Gyeong- 2.80 2.82 2.89 1.53 1.85 1.99 2.19 2.07 0.97 1.49 2.11 2.37 2.64 2.54 2.58 buk Gyeo- 2.11 2.36 2.71 1.83 1.99 2.43 1.58 1.69 1.27 1.48 1.72 2.10 2.07 2.24 2.13 ngnam Jeju 3.45 5.78 7.86 1.27 3.99 5.98 1.47 2.09 3.37 3.57 5.25 7.74 4.39 6.53 9.56
Note: The data are based on the YOY rate of change determined at the end of November Source: MOLIT
50 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Busan The rate of increase in the land value of residential and commercial zones in Busan was the highest among the metropolitan cities, with a sharp increase observed every year.
○ The rate of increase in the land value of residential zones was 4.16% (2016), with the level of increase on a steady rise from 2014 (2.21%) and 2015 (2.82%).
○ The rate of increase in the land value of commercial zones was 5.13% (2016), with the level of increase on a steady rise from 2014 (1.91%) and 2015 (3.29%).
○ The rate of increase in the land value of industrial zones was 1.68% (2016), with the level of increase continually contracting over the years.
Daegu In the case of Daegu, which recorded the highest level of increase in land value in 2015, the rate of increase land value of residential and commercial zones rose slightly, but the rate of increase in the land value of industrial zones contracted.
○ The rate of increase in the land value of residential zones and commercial zones were high at 4.07% and 3.21%, respectively.
○ The rate of increase in the land value of industrial zones was 1.93%, which was lower compared to 2014 (4.18%) and 2015 (3.64%).
Ulsan The rate of increase in land value in Ulsan has been on a steady rise overall in Ulsan, but due to the downturn of the local industry, the rate of increase in the land value of industrial zones fell sharply.
○ The rate of increase in land value by zoning in 2016 was around the national average at 2.86% (9th in the country) for residential zones, 2.23% (8th) for commercial zones, 1.99% (10th) for green zones, and 2.77% (3rd) for planned management zones.
○ In contrast, the rate of increase in the land value of industrial zones was recorded at 0.63%, which was very low. This was caused by the recession in the local economy* caused by the slowdown in the shipbuilding and marine industries, which are the primary industries of Ulsan.
51 * Land value has been continually declining in the past 3 years in Dong-gu, Ulsan, where Hyundai Heavy Industries is based, and the rate of decrease has been on the rise (△0.05% in 2014, △0.08% in 2015, △1.13% in 2016).
Sejong The rate of increase in land value in Sejong was very high, and it was the second highest in the country for all types of zoning, following Jeju.
○ The rate of increase in land value was 4.28% for residential zones, 3.15% for industrial zones, 3.88% for green zones and 4.54% for planned management zones.
○ The rate of increase in the land value of commercial zones was 5.16%, which is fairly high, but this was half the rate of increase reported for the previous year (2015), which was 10.07%. * It appears that the rate of increase dropped due to the mass supply of commercial shops in Sejong.
Jeju The rate of increase in land value in Jeju was the highest in the country for all types of zoning in 2016.
○ The rate of increase in the land value of residential zones has been the highest in the country since last year, and it rose even higher in 2016 to 7.86%.
○ The rate of increase in the land value of commercial and industrial zones rose steadily and reached 5.98% and 3.37%, respectively.
○ The rate of increase in the land value of planned management zones was 9.56%, which was around double that of Sejong (4.54%), which came in second place.
○ Overall, the rate of increase in land value rose continually in Jeju due to the growing pressure for land development for all zoning types. * Persistent pressure for development arising from a growing number of foreign tourists visiting and investing in Jeju, investment in and move-ins in the English Education Village and Inno-City, and construction of a secondary airport.
52 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Geoje Due to the recession in the shipbuilding and marine industries, which are the primary industries of Geoje, the land value of all zoning types falling under the “urban zone” has declined.
○ The rate of increase in land value has shifted toward a downtrend with the rate of increase in the land value being only △0.59% for residential zones, △1.05% for commercial zones, and △0.02% for green zones.
○ Of particular note, the land value of industrial zones, where the infrastructures of the manufacturing industry including the shipbuilding and marine industries are located, dropped sharply by 3.32%.
○ While the land value of green zones increased by 0.29%, this was the lowest increase in the country.
53 Figure 1-42 Rate of change in land vale by zoning type and region
Residential zone Residential zone Seoul 4% Busan 4%
2% 2% Planned Commercial Planned Commercial management zone management zone zone 0% zone 0%
Green zone Industrial zone Green zone Industrial zone
Residential zone Residential zone 4% 4% Daegu Incheon
2% 2% Planned Commercial Planned Commercial management zone management zone zone 0% zone 0%
Green zone Green zone Industrial zone Industrial zone
Residential zone Residential zone 4% 4% Gwangju Daejeon 2% 2% Planned Commercial Planned Commercial management zone management zone zone 0% zone 0%
Green zone Industrial zone Green zone Industrial zone
Residential zone Residential zone 4% 4% Ulsan Sejong Planned 2% 2% Commercial Planned management Commercial zone management zone zone 0% zone 0%
Green zone Industrial zone Green zone Industrial zone
Residential zone 10% 4% Residential zone 8% Jeju Geoje 2% 6% 0% Planned 4% Commercial Planned Commercial management - 2% zone management 2% zone zone zone - 0% 4%
Green zone Industrial zone Green zone Industrial zone
Source: MOLIT
2014 2015 2016 (Dec. 2013~Nov. 2014) (Dec. 2014~Nov. 2015) (Dec. 2015~Nov. 2016)
54 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
3) Trends6) in Land Transaction Volume by Region
Land Transaction Volume7) The land transaction volume reached its peak in 2015, and has generally been on the rise, albeit it has staggered slightly afterwards.
○ The land transaction volume has been rising centering on the capital area, and declining centering on the rural areas.
○ The land transaction volume in the capital area has steadily risen, with transactions of 1.15 million lots in 2016. The transaction volume has been on the rise in Seoul and Gyeonggi-do.
○ In the case of the rural areas, there were transactions of 1.56 million lots in 2016, which was slightly lower compared to the previous year. The number of land transactions declined in both the metropolitan cities (540,000 lots) and provinces (1.13 million lots) outside the capital area.
○ In particular, the land transaction volume also dropped in Sejong, while it showed a steady trend in Jeju for the first time in 5 years.
Figure 1-43 Cumulative land transaction volume from Jan. to Nov. by region (Unit: thousand lots) 2,000 1,000 1,713 1,569 1,343 1,500 1,393 678.0 1,100 1,150 500 420.0 496.4 1,000 696 334.3 663 239.4 175.7 500
0 0 Capital area Rural areas Seoul Gyeonggi
1,183 1,200 1,134 1,000 1,017 957 65.0 65.0 800 619 543 476 457 500 43.5 40.3 29.8 400 30.8 14.9 - - 0 Other metropolitan cities Other provinces Sejong Jeju 2011 2012 2013 2014 2015 2016 Note: Cumulative land transaction volume from Jan. to Nov. of the year concerned Source: MOLIT
6) In this chapter, the transaction volume is analyzed based on the number of lots sold because the number of lots sold better reflect the real life and real estate market situations. 7) The land transaction volume is determined based on the data on the land-only transactions and transactions involving both land and attached properties.
55 Land Only8) The land-only transaction volume reached its peak in 2014, and has been steady from 2015 to 2016.
○ The land-only transaction volume in Seoul National Capital Area has been on a steady rise since 2013, whereas it has been declining outside the capital area.
○ The land-only transaction volume has been continually rising in the capital area, with 250,000 transactions in total attributable to the sales of 17,000 lots in Seoul and 210,000 lots in Gyeonggi in 2016.
○ The land-only transaction volume declined in the non-capital area in both the metropolitan cities and provinces in 2016 compared to the previous year, with transactions of 89,000 lots in the metropolitan cities and 670,000 lots in the provinces for a total of 750,000 transactions.
○ The land-only transaction volume in Sejong has been on a steady decline since 2013, but there was a surge in 2016, with transactions of around 7,300 lots.
○ The land-only transaction volume in Jeju has been on a continuous rise, but it was somewhat stagnant in 2016, with transactions of around 41,000 lots.
Figure 1-44 Cumulative land-only transaction volume from Jan. to Nov. by region (Unit: thousand lots)
300 250 1,000 20 17.0 300 224 786 15.1 685 719 754 213.5 175 182 200 200 144.4 500 10 100 100
0 0 0 0 Capital area Rural areas Seoul Gyeonggi
150 1,000 10 60 7.0 7.3 43.3 97.8 625 701 677 41.4 89.2 594 5.7 100 74.9 40 70.8 24.7 500 5 19.4 50 2.2 20 - - - 0 0 Other metropolitan cities Other provinces Sejong Jeju
2011 2012 2013 2014 2015 2016
Note: Cumulative transaction volume from Jan. to Nov. in the year concerned Source: MOLIT
8) Analyzed solely based on land-only transactions among all types of land transactions.
56 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Trends in Land Value Related to Major Policy Projects
1) KTX Station Area
Major KTX Station Areas The rate of increase in the land value of the KTX station areas in 2016 was high in regions, where there was aggressive development of areas adjacent to subway and train stations, and around the newly established Honam Line.
○ In the case of Osong Station (3.2%), Gimcheon Gumi Station (3.5%), Dongdaegu Station (4.5%), and Singyeongju Station (4.1%), the level of increase in land value was higher compared to their respective mother cities, due to the development of the station area and the adjacent areas. * Compared to the mother cities of other KTX station areas, the mother cities of the KTX station areas of Daegu and Gyeongbuk saw high levels of increase in land value, but the level of increase in the land value of the station areas was higher. ** The increase in land value in the station areas was deemed attributable to the development of the station area for Osong Station, the impact of the development of Gyeongbuk Inno-City for Gimcheon Gumi Station, the construction of Shinsegae Department Store and transfer center for Dongdaegu Station, and the plans to build a new access road for Singyeongju Station.
○ In the case of the newly established Gwangju Songjeong Station, the level of increase in the land value of the station area was higher than its mother city due to the opening of the station. * KTX Honam Line was opened in April 2015, and it is deemed that the developmental potential and psychological effect (anticipation) have continued on ever since.
57 Figure 1-45 The land value change of major KTX station influence areas and mother cities rate in 2016
8% % % % % . 1 % % % . 5 % % 7 % . 1 % 6% . 6 % . 8 4 % % % % . 5 % . 7 4 . 2 . 2 3 3 . 0 % % % % % % . 7 3 % . 1 2 . 5 . 5 % 3 3 % . 0 . 7 3 . 2 2
4% 2 . 9 . 8 2 2 . 8 . 0 . 0 . 7 2 1 . 5 2 . 3 . 2 1 1 1 2 2 1 1 1 2% 1 0%
Iksan Station Seoul Station Busan Station Osong Station Daejeon Station Yongsan Station Jeongeup Station Dongdaegu Station Singyeongju Station Cheonan Asan Station Gwangmyeong Station Gimcheon Gumi Station
Capital area Chungcheong area Yeongnam area Honam area Gwangju Songjeong Station
KTX station area Mother city Note: 1) Calculated the rate of change in land value based on the sample lands within the KTX station area (1,000m radius) 2) Excluded station areas with a small number of samples 3) Cheonan Asan Station’s mother city was condered Asan, and Gimcheon Gumi Station’s mother city was considered Gimcheon. 4) Pioerd: Dec. 2015 ~ Nov. 2016 Source: KAB
2) Inno-City
In the case of the inno-cities in all regions, except for Daegu, Gimcheon and Jeju, the rate of change in land value in 2016 was slightly higher than that of their respective mother cities.
○ The rate of increase in the land value of the Daegu Inno-City was 2.3%, which was lower than that of Daegu. This is deemed to have been due to the relatively limited room for increase, as all of the enterprises have moved in by 2015.
○ Although the Jeju Inno-City recorded a very high rate of increase of land value at 7.0%, its mother city, Seogwipo, recorded an even higher rate of increase, thanks to the favorable conditions presented by the plans to build another airport in Jeju. This is deemed to have resulted in a relatively lower rate of increase in the land value of the Inno-City.
○ As for the inno-cities of all the small- and medium-sized cities, the rate of increase in land value was higher than that of their respective mother cities. Of particular note, land value in the Gangwon Inno-City (Wonju), Jeonbuk Inno-City (Jeonju and Wanju), Jeonnam Inno- City (Naju) and Gyeongnam Inno-City increased by 4.0%, 3.6%, 5.4% and 5.3%, respectively, which were the highest among all of the inno-cities nationwide.
58 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
* It is deemed that the increase in land value resulting from these inno-cities was perceived high because the local economy of their respective mother cities were not very large.
Figure 1-46 Rate of change in the land value of inno-cities in 2016 % . 3 % 8
8% . 0 7 % % . 4 . 3 % 5
6% % 5 % . 8 . 4 % % 3 % 4 . 0 % % . 7 . 6 4 . 6 % % 3 % 3 3 % . 6 . 1 4% % . 9 % . 8 2 3 . 7 % . 6 % 2 . 5 2 % 2 2 . 3 % 2 . 2 . 0 2 . 8 2 . 7 2 1 2% 1
0% Busan Daegu Ulsan Gangwon Chungbuk Jeonbuk Jeonnam Gyeongbuk Gyeongnam Jeju (Wonju) (Jincheon, (Jeonju, (Naju) (Gimcheon) (Jinju) (Seogwipo) Eumseong) Wanju)
Inno-City Mother city 1 Mother city 2 (Chungbuk: Eumseong-gun Jeonbuk: Wanju-gun) Note: 1) Subsituted the inno-city name with the name of the region 2) Period: Dec. 2015~Nov. 2016 Source: KAB
3) Industrial Complex
Generally speaking, the rate of increase in the land value of industrial complexes was very low, and only the industrial complexes in Chungbuk recorded a very high rate of increase in the land value.
○ The rate of increase in the land value of the industrial complexes in Ulsan was the lowest in the country at 0.0%, as a result of the slump in the primary local industries including the shipbuilding and heavy industries, and it was considerably lower than the rate of increase in land value in the mother city (2.2%).
○ In the case of other metropolitan cities such as Busan, Daegu and Gwangju, the rate of increase in the land value of the industrial complexes in Busan, Daegu and Gwangju increased by 0.9%, 1.5%, and 2.4%, but the level of increase was lower compared to that of their respective mother cities.
59 ○ In the case of the industrial complexed in Chungbuk, the rate of increase in land price was very high at 9.3%, which was 5 times higher than that of its mother city. * The rate of increase in land value was very high due to the construction of the Chungju Megapolis Industrial Complex and the designation as a foreign investment zone.
Figure 1-47 Rate of change in the land value of the regional industrial complexes an their respective mother cities % . 3 9 8%
6% % % . 8 . 6 3 % 3 % % % 4% % % % % . 7 % % . 5 % . 4 % . 3 . 3 2 % % . 2 . 2 . 2 2 % . 1 2 . 0 2 2 % % 2 . 8 2 . 8 2 2 . 6 % . 6 2 % . 5 1 1 . 3 % . 2 1 1 1 . 0 . 9
2% 1 1 % . 6 1 0 0 . 0 0 0% Busan Daegu Gwangju Ulsan Gyeonggi Gangwon Chungbuk Chungnam Chungnam Jeonnam Gyeongbuk Gyeongnam
Industrial complex their respective mother cities
Note: 1) “Industrial complexes” include national, general, urban high-tech, and agricultural-industrial complexes. 2) Regions without industrial complexes or a small sample size were excluded. 3) Period: Dec. 2015~Nov. 2016 Source: KAB
60 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Commercial Real Estate Market
Woo Namkyo
Trends in Office Rent Market
1) Vacancy Rate and Rent
In the office building rental market, the rent and the rent price index in 2016 showed a continuous downtrend, due to the influence of the delayed recovery of business economy resulting from the slump in exports and the manufacturing sector. Vacancy climbed up slightly in the first half of the year, but it declined by a small margin in the second half.
○ The Rent was high in the capital area including Seoul and Gyeonggi, where there was high demand for rent by enterprises, while the rent price index dropped in Ulsan and Gyeongnam. As of the end of September in 2016, the rent of nationwide was KRW 14,700/㎡,
Table 1-14 Trends in office rentals by rent market (YOY rate of change, as of Sept. 2016) ju oul egu san san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy Vacancy 13.0 9.4 17.2 18.4 19.3 17.2 24.5 22.8 5.3 6.7 17.7 26.9 10.1 23.1 18.2 17.2 12.6 rate (%) Rent (thousand 14.7 20.4 7.9 7.4 9.3 6.1 5.0 7.9 11.2 6.7 4.5 7.3 4.2 5.3 7.3 6.5 4.7 KRW/㎡) Rate of change in -0.2 -0.2 0.2 -0.1 -0.2 -1.0 -0.2 -1.6 -0.3 -0.2 -0.2 0.0 0.8 -0.2 -0.5 -0.8 0.0 rent price index (%)
61 which was a 0.4% YOY decrease, and the rent price index fell by 0.2% compared to the same period in the previous year.
○ The vacancy rate showed an uptrend due to the unfavorable conditions at home and abroad including Brexit and the restructuring of the shipbuilding industry in the first half of 2016; however, it declined to a slight extent to 13.0%, as of the end of September in 2016.
○ In Seoul, the rent has been on a downtrend overall, due to the continuous supply of new office spaces, and the vacancy rate has been maintained at a relatively low level compared to the national average.
○ In the case of Ulsan and Gyeongnam, the rent has generally declined due to the impact of the local economic recession resulting from the restructuring of the shipbuilding and shipping industries, and the shrinking demand for office rentals has increased vacancy.
Figure 1- 48 The rent and rate of change in the rent price index of office building by region (compared to the end of the previous year)
20.4
14.7
11.2 9.3 7.9 7.4 7.9 7.3 7.3 6.1 6.7 6.5 5.0 5.3 4.5 4.2 4.7
0.8 0.2 0.0 0.0
-0.2 -0.2 -0.1 -0.2 -0.2 -0.3 -0.2 -0.2 -0.2 -0.5 -0.8 -1.0 -1.6 Nation Seoul Busan Daegu Incheon Gwangju Daejeon Ulsan Gyeonggi Gang Chungbuk Chung Jeonbuk Jeon Gyeong Gyeong Jeju -wide -won -nam -nam -buk -nam
Rent (thousand KRW/㎡) Rate of change in the rent price index(%)
62 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Table 1-15 Trends in office rent price index and rate of change compared to the end of the previous year by region
Rate of Region `15.1Q `15.2Q `15.3Q `15.4Q `16.1Q `16.2Q `16.3Q change Nationwide 100.3 100.2 100.0 100.0 99.9 99.9 99.8 -0.2 Seoul 100.3 100.2 99.9 100.0 100.0 99.9 99.8 -0.2 Busan 100.1 100.0 100.0 100.0 100.0 100.0 100.2 0.2 Daegu 101.0 100.1 100.0 100.0 99.9 99.9 99.9 -0.1 Incheon 100.0 100.0 100.0 100.0 100.0 99.8 99.8 -0.2 Gwangju 100.9 100.7 100.6 100.0 99.1 98.8 99.0 -1.0 Daejeon 99.9 99.9 99.9 100.0 100.0 100.4 99.8 -0.2 Ulsan 100.3 100.1 100.0 100.0 99.8 99.3 98.4 -1.6 Gyeonggi 100.4 100.3 100.0 100.0 99.7 99.7 99.7 -0.3 Gangwon 100.1 100.1 102.9 100.0 100.0 99.8 99.8 -0.2 Chungbuk 100.7 100.5 100.0 100.0 100.0 99.8 99.8 -0.2 Chungnam 101.8 101.7 100.9 100.0 100.0 100.0 100.0 0.0 Jeonbuk 100.3 100.3 99.8 100.0 100.0 100.0 100.8 0.8 Jeonnam 100.7 100.4 100.3 100.0 100.0 99.9 99.8 -0.2 Gyeongbuk 100.3 100.0 100.0 100.0 99.6 99.6 99.5 -0.5 Gyeongnam 100.3 100.2 100.2 100.0 100.2 99.6 99.2 -0.8 Jeju 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0
Note: 1) The index was calculated based on 2015, 4Q (=100), and negative changes are indicated in red 2) The quarterly index was calculated based on the last date of the last month of the quarter.
Seoul The vacancy rate is lower and the rent is higher than the national average. Vacancies became filled, with the drop in rent in the Dongdaemun and Chungmuro commercial districts, and in the commercial districts with a high vacancy rate such as the Gangnam- daero area of Gangnam. This contributed to the overall decline in the vacancy rate.
○ Central The vacancy rate in the central business district, centering on the Dongdaemun, Seoul Station and Chungmuro commercial districts, steadily declined to 10.3%, which was a 0.5%p drop compared to the end of last year. Most of the commercial districts in this particular area, except for Dongdaemun and Chungmuro, show a higher level of rent compared to the average rent in Seoul. The rent price index fell by 0.3% since the end of last year, with rent being around KRW 24,300/㎡.
○ Gangnam Vacancies along Gangnam-daero and in Seocho were reduced, and the overall vacancy rate in Gangnam fell to 9.0% (a 2.5%p decrease since the end of last year). While rent in the Gangnam-daero and Teheran-ro commercial districts is higher than the average
63 rent in Seoul, rent and the rent price index have remained on a downtrend. Rent has decreased by 0.9% since the end of last year to KRW 21,100/㎡, while the rent price index has dropped by 0.1% since the end of last year.
○ Yeouido and Mapo Vacancies in the Yeongdeungpo commercial sphere have climbed up, but vacancies have filled up in the Gongdeok Station and Yeouido commercial districts, resulting in an overall vacancy rate of 9.1% in the Yeouido and Mapo area. Rent increased by 0.3% since the end of last year to KRW 18,500/㎡, which is around the average in Seoul, while the rent price index has remained steady since the end of last year.
○ Others Although vacancies have been filled to some extent in the Hwagok commercial district, vacancies climbed up in Mok-dong and Sadang, causing the vacancy rate in the “other areas” of Seoul to be maintained at 9.5% after an increase at the beginning of 2016 (1.2%p increase since the end of last year). The rent level in most of the commercial districts, excluding Sadang, is below the average in Seoul. Amidst this trend, rent in the Jamsil and Hwagok commercial districts fell somewhat, and thus the rent price index in other areas dropped by 0.1% since the end of last year.
Table 1-16 Vacancy rate, rent and rent price index of office buildings in Seoul
Vacancy rate (%) Rent (thousand KRW/㎡) Rent price index Small-to- Small-to- Compared to the Large size medium Total Large size medium Total Index end of the size size previous year (%) Seoul average 9.5 9.3 9.4 24.7 17.7 20.4 99.8 -0.2 Central 7.8 12.9 10.3 29.2 18.9 24.3 99.7 -0.3 Gangnam 4.1 10.3 9.0 24.3 20.2 21.1 99.9 -0.1 Yeouido-Mapo 13.7 5.9 9.1 23.1 15.0 18.5 100.0 0.0 Others 23.3 6.6 9.5 13.5 14.2 14.1 99.9 -0.1
Note: 1) Reference point for the rent price index: 2015 4Q (=100) 2) Size standard: Large size = Gross floor area of over 33,058㎡ / Small-to-medium size = under 33,058㎡
64 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
2) Return on Investment
With the benchmark interest rate cut once again in June 2016 (from 1.50% to 1.25%) and the strengthened low interest rate trend, there has been continued interest in investing in commercial real estate. Accordingly, the asset value of commercial real estate has remained on an uptrend, with the return on investment (ROI) in the past year being 6.02% as of the end of Sept. 2016.
○ Seoul (6.76%), Busan (6.47%), and Gyeonggi (7.21%) recorded a relatively high ROI, whereas Chungbuk (1.54%), Gwangju (3.27%), and Daejeon (3.38%) recorded a low ROI. In particular, Jeju recorded the highest ROI of 9.51%, thanks to the thriving commercial real estate market and high anticipation for development.
○ In Seoul and Gyeonggi, the major trends were stable rental income and investment in small- to-medium-sized buildings due to low interest rates, and this resulted in a relatively high ROI. On the other hand, in Chungbuk, there was generally a lack of demand for rentals, which led to a high vacancy rate (26.9%) and the lowest ROI in the country.
Table 1-17 Annual ROI for office buildings by region
(Unit: %) ju oul egu san san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy Income 4.56 5.13 4.22 3.93 4.39 2.70 2.56 4.30 6.29 3.98 1.87 2.83 2.72 4.03 3.77 3.26 2.62 rate ROE 1.41 1.57 2.18 1.40 0.78 0.56 0.80 0.42 0.88 0.77 -0.32 1.63 1.35 0.58 1.01 1.82 6.76 ROI 6.02 6.76 6.47 5.37 5.20 3.27 3.38 4.73 7.21 4.77 1.54 4.50 4.09 4.63 4.80 5.12 9.51 Note: Rate of return was calculated based on the rate of return in the past year, as of the end of Sept. 2016
65 Figure 1- 49 ROI for office buildings by broad-area commercial spheres in Seoul
9.51
7.21 6.76 6.47 6.02 5.37 5.20 5.12 4.73 4.77 4.50 4.63 4.80 4.09 3.27 3.38
1.54
Nation Seoul Busan Daegu Incheon Gwan Daejeon Ulsan Gyeon Gang Chung Chung Jeon Jeon Gyeong Gyeong Jeju -wide -gju -ggi -won -buk -nam -buk -nam -buk -nam
Income rate (%) ROE (%) ROI (%)
Seoul The rate of return in Seoul is higher than the national average. The annual ROI, as of the end of Sept. 2016, was 6.76%, due to the increased interest in and investment into commercial real estate.
○ Central The rate of increase in asset value has declined relatively to other spheres, but the income rate was maintained at a high level, which resulted in the highest ROI of 7.10% among the four major areas in Seoul.
○ Gangnam Although the rent level has dropped slightly, the annual rate of return was 6.59%, due to the decline in vacancies and high rate of increase in asset value.
○ Yeouido-Mapo The steady demand for rent resulted in a stable rental income, and an annual ROI of 7.05% was observed.
○ Other areas Other areas recorded the lowest ROI in Seoul at 6.03%. There was high deviation among the lower markets, and ROI in these areas was similar to the national average.
Table 1-18 Annual ROI for office buildings in Seoul
(Unit: %) Nationwide Seoul Central Gangnam Yeouido-Mapo Other areas Income rate 4.56 5.13 6.20 4.32 5.61 4.46 ROE 1.41 1.57 0.86 2.20 1.38 1.52 ROI 6.02 6.76 7.10 6.59 7.05 6.03
Note: Rate of return was calculated based on the rate of return in the past year, as of the end of Sept. 2016
66 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1- 50 ROI for office buildings in Seoul
7.10 7.05 6.76 6.59 6.02 6.03
Nationwide Seoul Central Gangnam Yeouido-Mapo Others Income rate (%) ROE (%) ROI (%)
Long-term Trends The annual ROI was maintained fairly high at 6.02% for office buildings nationwide, as of the end of Sept. 2016. The average ROI has been 5.93% in the past 3 years.
○ The annual rate of return for commercial real estate has been on a steady uptrend, due to the continued interest and increase in investor demand.
○ However, in the Ulsan and Gyeongnam area, the local economic slowdown resulting from the slump in the shipbuilding and manufacturing industries has led the annual ROI to continue on a downtrend (annual ROI fell to 1.48% in 2015 compared to 2014).
○ In the recent 3 years, the average annual ROI was the highest in Seoul (6.74%), followed by Busan (6.44%) and Gyeonggi (6.29%), which were all higher than the national average. Meanwhile Chungbuk recorded the lowest ROI at 1.81%.
○ In the four commercial spheres of Seoul, the annual ROI declined slightly, yet it is still fairly high (CBD - 7.28%, Gangnam - 6.39%, Yeouido-Mapo - 7.02%, Other areas - 6.20%). In particular, the average ROI was the highest in CBD at 7.28% in the past 3 years.
67 Fig. 1- 51 Trends in annual ROI (%) for office buildings by region
9.51
7.21 6.76 6.47 6.02 5.37 5.20 5.12 4.73 4.77 4.50 4.63 4.80 4.09 3.27 3.38
1.54
Nation Seoul Busan Daegu Incheon Gwan Daejeon Ulsan Gyeong Gang Chung Chung Jeon Jeon Gyeong Gyeong Jeju -wide -gju -gi -won -buk -nam -buk -nam -buk -nam
2013 2014 2015 2016 3Q (end of Sept.)
Table 1-19 Trends in annual ROI by region
(Unit: %) Region Trends in the rate of change in the annual ROI (%) for office buildings 3-year 2013년 2013 2014 2015 2016.9월 기준 average* Nationwide 5.29 5.91 5.93 6.02 5.93 Seoul 6.25 6.71 6.83 6.76 6.74 Central 6.84 7.30 7.48 7.10 7.28 Gangnam 5.92 6.28 6.29 6.59 6.39 Yeouido-Mapo 7.11 6.86 7.37 7.05 7.02 Others 5.14 6.52 6.17 6.03 6.20 Busan 6.01 6.56 6.28 6.47 6.44 Daegu 3.62 5.71 5.53 5.37 5.53 Incheon 3.54 3.78 4.16 5.20 4.44 Gwangju 2.37 2.43 3.10 3.27 2.97 Daejeon 2.02 3.68 2.69 3.38 3.05 Ulsan 6.62 6.22 4.74 4.73 5.46 Gyeonggi 5.31 5.73 6.45 7.21 6.29 Gangwon 4.17 3.38 4.60 4.77 4.01 Chungbuk 2.56 2.81 0.80 1.54 1.81 Chungnam 2.76 4.36 2.97 4.50 3.56 Jeonbuk 3.96 4.49 4.41 4.09 4.38 Jeonnam 4.57 5.48 5.47 4.63 5.14 Gyeongbuk 4.92 6.06 5.42 4.80 5.55 Gyeongnam 4.18 4.53 5.23 5.12 4.92 Jeju 3.83 4.57 6.30 9.51 5.74
Note: Annual ROI= , where is the ROI in quarter, and the 3-year average ROI (2013 4Q to 2016 3Q) is the geometrical mean of the annual ROI.
68 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Trends in Retail Rent Market
1) Vacancy Rate and Rent
Vacancies in retail stores among commercial real estate properties in 2016 occurred in some of the commercial districts that were stagnant, with an increase in the vacancy rate of small and medium-to-large retail stores. As private consumption made a steady recovery, the rent price index of medium-to-large retail stores and rental fees of small retail stores were on a continuous uptrend, whereas the rent price index of aggregate retail stores dropped by a small margin.
Medium-to-large retail stores Vacancy rate decreased in Busan (9.5%), Gwangju (10.1%), Daejeon (11.6%), Gyeonggi (6.7%), Jeju (9.7%) compared to the end of the previous year. Vacancy rate was the highest in Jeonbuk at 19.8%. Rent was high in the capital area and Busan, where the land value and floating population were high. While the rent price index climbed 0.3% since the end of last year, it declined in some of the regions (Gwangju, Daejeon, Ulsan, Gyeongnam) due to the slump in the local commercial districts.
○ In Seoul, the vacancy rate fell as a result of the continued drop in rental feels in the Myeong- dong commercial district. In the Hongdae-Hapjeong commercial district, there was a slightly increase in vacancies, but rent still climbed due to the expansion of the commercial district resulting in a higher demand for retail stores outside the existing area. Rent was reduced in areas with a relatively high vacancy rate such as Cheongdam and Mok-dong; thus, rent in Seoul declined somewhat from the level recorded in the beginning of the year.
○ Due to the impact of the opening of the Incheon Line 2 (light rail system), the long-term vacancy issue in the Juan commercial district was alleviated, and rent increased due to the growing floating population. In the case of Daejeon, vacancy rate dropped as the vacancies became filled in the commercial districts with a high vacancy rate such as the commercial district around the bus-train terminal.
69 Small retail stores The vacancy rate, which increased to some extent in the first half 2012, recorded 5.2% in the second half due to the growing demand for small retail spaces on the first or second floor as a result of a growing number of self-employed individuals. Due to the relatively conditions such as the building size, rent was around KRW 16,500/㎡, which was lower than that of medium-to-large retail stores, but it was a 0.4% increase since the end of the previous year.
○ In Seoul, vacancy declined as the demand for new rentals remained steady around the vigorous commercial districts such as the Sungshin Women’s University area. In the case of the Chungmuro and Jukjeon (Daegu) commercial districts, new lease contracts were signed based on a higher rent than the conventional rental fees, and this led to an increase in rent.
○ In the case of Gyeongbuk, vacancies occurred in retail stores that had poor accessibility from the Gumi Industrial Complex, and this increased the vacancy rate. As for Gangwon, vacancies were reduced with new lease agreements signed in the Gangneung commercial district.
○ In the case of the original Central of Daejeon and the Wonju commercial district, demand for rentals shifted to the new commercial districts, causing these commercial districts to shrink and rent to decline.
Aggregate Retail Stores The market rent declined slightly in Ulsan and Sejong, and thus the national rent price index fell by 0.1% from the end of last year. Rent was high in metropolitan cities such as Seoul and Busan, and rent increased by a small margin in Daejeon, while rent was adjusted downward in Sejong, as the initial pre-construction parceling-out sales prices were too high.
○ In Seoul, the rent is generally stable, but it was reduced by a small margin in Mok-dong and Yeongdeungpo due to the slight stagnation in the commercial districts.
○ In Sejong, the initial pre-construction parceling-out sales prices were high compared to the actual demand for lease; despite this, however, new aggregate retail stores continued to be supplied, which in turn pulled down the rental fees.
○ In Jeju, the rent and the rent price index increased by a small margin due to the continued inflow of tourists.
70 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Table 1-20 Vacancy rate of retail stores by region (%)
(as of the end of Sept. 2016) ju oul egu san jong san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da Se In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy Medium 10.7 7.7 9.5 12.5 9.7 10.1 11.6 12.5 - 6.7 15.7 16.2 13.8 19.8 13.3 17.0 9.3 9.7 -to-large
Small 5.2 2.6 8.8 4.0 4.1 5.0 12.1 0.6 5.9 6.2 3.5 3.2 5.5 7.7 3.7 7.8 5.8 3.2
Note: In the case of aggregate retail stores, the statistical data on the vacancy rate was not calculated as only some of the units of the buildings were examined.
Table 1-21 Rent for retail stores (A, thousand KRW/㎡) and rate of change in the rent price index (B, %) by region
(As of the end of Sept. 2016, rate of change calculated in comparison to the end of the previous year) ju oul egu san jong san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da Se In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy
Medium- A 31.1 58.1 30.2 23.9 31.8 22.2 18.5 18.6 - 32.3 20.5 20.8 13.5 16.0 11.2 14.9 16.9 12.5 to-large B 0.3 0.1 0.9 0.6 0.7 -0.2 -0.1 -0.4 - 0.8 -0.1 -0.3 0.1 0.5 0.7 -0.3 -0.7 0.9 Small A 16.5 46.8 26.3 21.2 15.2 14.3 12.3 13.7 15.0 22.1 13.0 11.2 11.9 9.3 9.8 12.3 13.1 12.2 Aggre- A 28.7 50.2 36.5 26.3 27.6 23.3 24.2 22.5 32.6 30.3 20.3 18.4 17.1 24.1 15.8 17.1 22.5 10.0 gated B -0.1 0.0 -0.3 0.1 -0.1 -0.6 0.4 -1.7 -4.3 0.1 0.1 -0.2 0.2 0.5 -0.2 -0.3 -0.5 1.0
Note: 1) The rent price index for small retail stores was not calculated as the time series data necessary for generating statistical data could not be obtained. 2) Reference point for the calculation of the rent price index: 2015 4Q (=100)
71 Figure 1- 52 Rent for retail stores by region (thousand KRW/㎡)
60.0 58.1
50.2 50.0 46.8
40.0 36.5 31.8 32.6 32.3 31.1 30.2 30.3 28.7 30.0 26.3 26.3 27.6 23.9 24.2 24.1 22.22 3.3 22.5 22.1 22.5 21.2 20.5 20.8 18.5 18.6 18.4 20.0 16.5 20.3 17.1 17.1 16.9 15.2 15.0 16.0 15.8 14.9 14.3 13.7 13.5 12.3 13.0 12.3 13.1 12.5 12.2 11.2 11.9 11.2 9.3 10.0 10.0 9.8
0.0 0.0 Nation Seoul Busan Daegu Incheon Gwan Daejeon Ulsan Sejong Gyeong Gang Chung Chung Jeon Jeon Gyeong Gyeong Jeju -wide -gju -gi -won -buk -nam -buk -nam -buk -nam
Medium-to-large retail stores Small retail stores Aggregated retail stores
Table 1-22 Trends in the rent price index of medium-to-large retail stores and rate of change compared to the end of the previous year by region
Rate of Region `15.1Q `15.2Q `15.3Q `15.4Q `16.1Q `16.2Q `16.3Q change Nationwide 99.9 99.9 100.1 100.0 100.2 100.3 100.3 0.3 Seoul 99.8 99.9 100.0 100.0 100.1 100.2 100.1 0.1 Central 100.1 100.0 100.0 100.0 100.2 100.2 100.2 0.2 Gangnam 99.8 99.9 100.0 100.0 100.0 100.0 100.0 0.0 Sinchon-Mapo 99.8 100.1 100.1 100.0 100.0 100.1 100.5 0.5 Others 99.7 99.8 99.9 100.0 100.1 100.2 100.1 0.1 Busan 99.1 99.5 99.8 100.0 100.3 100.8 100.9 0.9 Daegu 100.2 99.7 100.0 100.0 100.3 100.4 100.6 0.6 Incheon 99.5 99.4 100.4 100.0 100.0 100.2 100.7 0.7 Gwangju 99.7 100.2 101.0 100.0 100.0 100.1 99.8 -0.2 Daejeon 100.1 100.0 100.0 100.0 100.4 100.4 99.9 -0.1 Ulsan 99.8 99.9 100.0 100.0 99.8 99.8 99.6 -0.4 Gyeonggi 100.2 100.0 100.1 100.0 100.3 100.6 100.8 0.8 Gangwon 99.3 100.0 100.1 100.0 100.0 99.8 99.9 -0.1 Chungbuk 100.1 100.1 100.0 100.0 100.0 100.0 99.7 -0.3 Chungnam 101.3 101.4 100.7 100.0 100.2 100.2 100.1 0.1 Jeonbuk 98.8 99.4 99.7 100.0 100.3 100.3 100.5 0.5 Jeonnam 99.6 99.7 99.9 100.0 100.2 100.6 100.7 0.7 Gyeongbuk 100.1 100.0 100.0 100.0 99.8 99.8 99.7 -0.3 Gyeongnam 100.2 100.2 100.2 100.0 100.6 99.7 99.3 -0.7 Jeju 99.4 99.5 99.5 100.0 100.2 100.3 100.9 0.9 Note: 1) The index was calculated based on 2015 4Q (=100), and negative changes are indicated in red. 2) The quarterly index was calculated based on the last date of the last month of the quarter.
72 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Table 1-23 Trends in the rent price index of aggregates retail stores and rate of change compared to the end of the previous year by region
Rate of Region `15.1Q `15.2Q `15.3Q `15.4Q `16.1Q `16.2Q `16.3Q change Nationwide 100.0 100.0 100.0 100.0 100.0 100.0 99.9 -0.1 Seoul 99.8 99.9 100.0 100.0 100.0 100.0 100.0 0.0 Central 99.9 99.9 100.0 100.0 99.8 99.8 99.8 -0.2 Gangnam 99.9 99.9 100.0 100.0 100.0 100.0 100.0 0.0 Sinchon-Mapo 100.0 100.0 100.0 100.0 100.0 100.0 100.0 0.0 Others 99.9 99.9 100.0 100.0 100.1 100.1 100.0 0.0 Busan 100.1 100.2 100.3 100.0 99.9 99.8 99.7 -0.3 Daegu 100.1 99.9 100.0 100.0 100.1 100.1 100.1 0.1 Incheon 100.0 100.0 100.0 100.0 99.9 99.9 99.9 -0.1 Gwangju 99.9 99.8 99.8 100.0 100.0 100.0 99.4 -0.6 Daejeon 99.9 99.8 100.0 100.0 100.0 100.1 100.4 0.4 Ulsan 100.5 100.1 100.1 100.0 99.5 98.6 98.3 -1.7 Sejong 114.9 110.5 108.2 100.0 98.5 97.9 95.7 -4.3 Gyeonggi 99.7 99.8 99.9 100.0 100.0 100.0 100.1 0.1 Gangwon 100.3 100.1 99.8 100.0 100.1 100.1 100.1 0.1 Chungbuk 100.1 100.0 100.0 100.0 100.0 99.9 99.8 -0.2 Chungnam 100.8 100.7 100.3 100.0 100.1 100.2 100.2 0.2 Jeonbuk 100.0 99.9 99.8 100.0 100.8 100.8 100.5 0.5 Jeonnam 100.5 100.4 100.4 100.0 100.0 100.0 99.8 -0.2 Gyeongbuk 99.9 99.9 100.0 100.0 99.9 99.9 99.7 -0.3 Gyeongnam 100.0 100.0 100.0 100.0 99.9 99.7 99.5 -0.5 Jeju 99.4 99.4 99.7 100.0 100.8 101.0 101.0 1.0 Note: 1) The index was calculated based on 2015 4Q (=100), and negative changes are indicated in red. 2) The quarterly index was calculated based on the last date of the last month of the quarter.
Seoul The vacancy rate was relatively low in Seoul compared to the national average, with the vacancy rate being 7.7% for medium-to-large retail stores and 2.6% for small retail stores. In the case of rent, it was around 1.7 (aggregated retail stores) to 2.8 (small retail stores) times higher than the national average.
○ In the case of small retail stores in Seoul, there was consistent demand for new rentals centering on the vigorous commercial districts, which in turn helped the vacancy rate drop by 0.7%p compared to the end of last year to 2.6% and rent to increase by 0.6% from the end of last year.
○ Central In some parts of the commercial sphere, vacancies among small and medium-to- large retail stores filled up, leading to a drop in the average vacancy rate. Rent was higher
73 in most of the commercial districts, except for Dongdaemun and Chungmuro, than the average in Seoul. While the monthly rent for medium-to-large retail stores in the CBD declined slightly compared to the end of last year, the rent price index increased by 0.2%. The rent for small retail stores climbed up from the end of last year, whereas both the rent and rent price index for aggregated retail stores declined.
○ Gangnam The vacancy rate of medium-to-large retail stores in Gangnam dropped by 0.2%p compared to the end of last year with the level of vacancy being alleviated in some of the commercial districts. Meanwhile, the highest rental fees were observed along Gangnam- daero (KRW 136,000/㎡) for medium-to-large retail stores and along Dosan-daero (KRW 79,400/㎡) for aggregated retail stores. Rent generally remained steady, while the rent price index declined by a small margin.
○ Sinchon-Mapo Different trends were observed among retail stores depending on the size: there was a slight increase in vacancies among medium-to-large retail stores and a decrease in vacancies among small retail stores. The rent for medium-to-large retail stores and aggregated retail stores was the highest in the Sinchon commercial district at KRW 58,400/㎡ and KRW 74,300/㎡, respectively, whereas the rent for small retail stores was the highest in the Hongdae-Hapjeong commercial district at KRW 68,000/㎡.
○ Other areas The rent for retail stores in most of the commercial districts was lower than the average in Seoul, and the rent price index dropped marginally.
Table 1-24 Vacancy rate, rent and rent price index of retail stores and rate of change compared to the end of last year in seoul
Seoul CBD Gangnam Sinchon-Mapo Other areas Vacancy rate (%) 7.7 7.6 7.3 8.2 7.5 Medium Rent (thousand KRW/㎡) 58.1 93.5 78.0 51.1 43.1 -to-large Rate of change in rent 0.1 0.2 0.0 0.5 0.1 price index (%) Vacancy rate (%) 2.6 2.4 - 2.0 3.9 Small Rent (thousand KRW/㎡) 46.8 52.7 - 55.1 34.5 Aggre- Vacancy rate (%) 50.2 86.1 59.4 38.9 43.1 gated Rent (thousand KRW/㎡) 0.0 -0.2 0.0 0.0 0.0
74 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
2) Return on Investment
As of the end of September 2016, the annual return on investment (ROI) was 6.51% for medium-to-large retail stores and 6.13% small retail stores. Such high annual ROI was achieved due to the growing interest in investing in commercial buildings based on the continued trend of low interest rates. Of particular note, aggregated retail stores, which are accessible to private investors, recorded the highest ROI of 7.28%.
○ The return on equity (ROE), indicating the changes in asset value, showed an uptrend due to the continued interest in commercial real estate properties resulting from the trend of low interest rates.
Medium-to-large retail stores Busan (8.45%), Daegu (8.01%), and Jeju (10.26%) recorded high ROIs, while Daejeon (4.92%), Jeonnam (4.90%), and Chungbuk (4.98%) recorded low ROIs.
○ While Seoul (Apgujeong, Gongdeok Station and Hongdae-Hapjeong), Busan (Haeundae), and Incheon (Guwol, Ganseok) recorded high ROIs centering on the vigorous commercial districts with a large floating population, the original CBD of Daejeon and the Geoje- Gyeongnam commercial districts recorded low ROIs due to decrepit commercial facilities and stagnation of the local economy, respectively.
Table 1-25 ROI for medium-to-large retail stores by region
(Unit: %) ju oul egu san san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy Income 4.64 4.20 5.07 4.90 5.98 5.65 3.89 5.03 4.99 5.35 5.41 4.34 4.29 3.97 4.53 4.03 5.01 rate ROE 1.81 2.30 3.26 3.00 1.55 0.80 1.00 0.95 1.15 0.35 -0.42 1.51 1.07 0.90 0.97 1.69 5.06 ROI 6.51 6.58 8.45 8.01 7.59 6.49 4.92 6.01 6.18 5.71 4.98 5.89 5.39 4.90 5.53 5.77 10.26
75 Small Retail Stores Busan (7.67%), Daegu (7.31%), and Jeju (11.20%) recorded high ROIs, whereas Daejeon (4.89%) and Sejong (5.54%) recorded low ROIs due to vacancies and lower rent.
○ High ROIs were achieved in the Hongdae-Hapjeong commercial district of Seoul, Haeundae-Seomyeon commercial district of Busan, and Dongseong-ro commercial district of Daegu, based on an abundant floating population and demand for profitable real estate properties.
○ The original CBD of Daejeon continued to see signs of stagnation in the commercial district such as an increase in vacancies, while Sejong recorded a low ROI due to the continuing trend of excess supply of retail stores.
Table 1-26 ROI for small retail stores by region
(Unit: %) ju oul egu san jong san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da Se In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy Income 4.13 3.47 3.94 3.45 4.04 5.33 3.25 3.40 3.80 4.52 4.40 4.70 4.60 3.80 4.64 3.98 3.54 5.24 rate ROE 1.95 2.24 3.62 3.76 1.50 1.55 1.60 2.24 1.69 1.88 1.16 0.31 1.24 1.24 1.29 1.88 2.19 5.75 ROI 6.13 5.77 7.67 7.31 5.58 6.94 4.89 5.70 5.54 6.46 5.60 5.02 5.88 5.07 5.97 5.92 5.79 11.20
Aggregated Retail Stores Busan (8.42%), Gyeongnam (8.29%), and Jeju (8.74%) recorded high ROIs, whereas low ROIs were observed in Sejong (3.01%), Daejeon (5.73%), and Chungbuk (5.16%).
○ Due to the growing demand for investment with little capital by private investors along Dosan-daero of Seoul, and in Haeundae of Busan and Siji District of Daegu, satisfactory ROIs were achieved.
○ The Jeonbuk and Jeonju commercial districts contracted due to the demand for rentals and the floating population moving to the commercial districts of new urban areas nearby. It also caused a drop in rent and resulted in low ROIs.
76 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Table 1-27 ROI for aggregated retail stores by region
(Unit: %) ju oul egu san jong san angju ejeon ngwon onbuk eonggi Je cheon ungbuk onnam ungnam tionwide Ul eongbuk Se Bu eongnam Da Se In Da Je Gw Je Gy Ga Ch Ch Na Gy Gy Income 5.33 5.41 5.18 4.77 6.00 5.44 4.34 6.18 2.47 5.48 5.27 4.68 4.49 4.74 4.75 5.07 6.81 4.77 rate ROE 1.87 2.07 3.12 3.35 1.10 1.50 1.35 1.15 0.53 1.30 0.88 0.46 1.21 1.06 1.00 1.36 1.41 4.80 ROI 7.28 7.56 8.42 8.23 7.15 7.00 5.73 7.38 3.01 6.84 6.18 5.16 5.74 5.84 5.78 6.49 8.29 9.74
Figure 1-53 Annual ROI for retail stores by region (Unit: %)
11.20 10.26 9.74 8.45 8.42 8.01 8.23 8.29 7.56 7.59 7.38 7.28 7.15 7.00 6.51 6.58 6.49 6.84 6.49 7.67 6.01 6.18 6.18 7.31 5.73 5.71 5.89 5.74 5.84 5.785 .53 5.77 6.94 5.16 5.39 4.92 5.54 6.46 4.98 4.90 6.13 5.97 5.77 5.58 5.70 5.60 5.88 5.92 5.79 5.07 4.89 3.01 5.02
Nation Seoul Busan Daegu Incheon Gwan Daejeon Ulsan Sejong Gyeong Gang Chung Chung Jeon Jeon Gyeong Gyeong Jeju -wide -gju -gi -won -buk -nam -buk -nam -buk -nam
Medium-to-large retail stores Small retail stores Aggregated retail stores
Seoul The vacancy rates are relatively low at 7.7% for medium-to-large retail stores and 2.6% for small retail stores, while the rental income is stable at above the national average. ROI is higher than the national average thanks to the vivacity of the commercial districts, with a large floating population.
○ Central Although ROI decreased slightly compared to the previous quarter, it was high for medium-to-large retail stores in the Jongno, Myeong-dong and Seoul Station commercial districts, for small retail stores in Chungmuro and Dongdaemun, and for aggregated retail stores in Jongno and Dongdaemun, in comparison with the CBD average.
○ Gangnam The highest ROI was recorded in the Apgujeong commercial district by medium- to-large retail stores and the Dosan-daero commercial district by aggregated retail stores, due to the increase in asset value.
77 Table 1-28 ROI for retail stores in Seoul
(Unit: %) Nationwide Seoul CBD Gangnam Sinchon·Mapo Other areas Medium Income rate 4.64 4.20 5.18 3.55 4.74 4.16 -to-large ROE 1.81 2.30 1.61 3.04 2.63 2.13 retail stores ROI 6.51 6.58 6.86 6.67 7.46 6.35 Income rate 4.13 3.47 3.37 - 4.42 2.83 Small retail ROE 1.95 2.24 1.80 - 3.02 2.42 stores ROI 6.13 5.77 5.21 - 7.54 5.31 Income rate 5.33 5.41 5.70 3.92 5.65 4.84 Aggregated ROE 1.87 2.07 2.66 1.83 1.97 1.72 retail stores ROI 7.28 7.56 8.48 5.81 7.70 6.62
○ Sinchon-Mapo Among the four broad-area commercial spheres of Seoul, the Sinchon- Mapo area showed the highest ROI for all of the commercial sizes. In Hongdae-Hapjeong, the annual ROI was clearly high at 8.36% for medium-to-large retail stores, 8.39% for small retail stores and 7.70% for aggregated retail stores.
○ Other areas Other areas recorded the lowest ROI among the four major commercial spheres of Seoul. ROI was 6.35 for medium-to-large retail stores, 5.31% for small retail stores, and 6.62% for aggregated retail stores, which were all lower than the average in Seoul.
Long-term Trends The ongoing interest in commercial real estate properties has been boosting the annual ROI. The ROI is the highest for aggregate retail stores.
○ In Jeju, one of the most popular tourist destinations in Korea, the annual ROI has been surging every year as a result of a growing number of tourists and the anticipation for local development heightened by the construction of a second airport in the region (3.27%p↑ in 2015 and 5.67%p↑ in 2016 compared to 2013 for medium-to-large retail stores).
○ In Sejong, the annual ROI for aggregated retail stores has been on a downtrend due to the high initial pre-construction parceling-out sales prices and the continuous supply of retail stores, and it reached the lowest point in Sept. 2016 (1.45%p↓ from 2014, and 0.57%p↓ from 2015).
78 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Table 1-29 National annual ROI by retail store type
(Unit: %) 2013 2014 2015 2016.9월 Medium-to-large 4.69 6.16 6.24 6.51 retail stores Small retail - - 5.85 6.13 stores Aggregated retail - 6.39 7.32 7.28 stores
Figure 1- 54 Trends in annual ROI by retail store type (Unit: %) 7.32 7.28 6.51 6.39 6.16 6.24 6.13 5.85
4.69
Medium-to-large retail stores Small retail stores Aggregated retail stores
2013 2014 2016 Oct. 2015~Sept. 2016
C. Trends in Transactions and Supply of Commercial Real Estate Properties
1) Office Building Sales Transactions9)
Nationwide Office building sales transactions rose in the year 2015, but due to the uncertainty of the real estate market arising from the hike in the benchmark interest rate in the U.S. on top of the stagnant economy, the sales volume of office buildings declined to 187 (2016 3Q), which was a 24.1% decrease since the end of last year.
9) This is based on the data on the actual transactions (sales transactions) of office facilities of general buildings, for which the sales contracts were concluded by the end of Sept. 2016, that have been aggregated as of December 2016. The actual value is subject to change depending on the transactions that are registered at a later date.
79 ○ The area with the highest office building sales transaction volume was Seoul (52 transactions), which saw a 20.9% increase since the end of last year. The office sales transaction volume increased by 50.0% in Incheon (9 transactions),but it decreased by 46.9% in Gyeonggi (43). Thus, the total transaction volume in the capital area, which accounts for 55% of the national office building sales transaction volume, decreased by 20.0% compared to the end of last year.
○ In all five metropolitan cities, the transaction volume sharply declined by 42.9% compared to the end of last year, whereas there was an 18.6% decrease in the provinces outside the capital area.
Figure 1- 55 Trends in office building sales transaction volume
249 250 218 208 202 189 200 178 172 161 152 149 137 150 116 123 103 110 100
50
- 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Capital area Metropolitan cities Provinces Nationwide
2) Trends in Office Building Supply10)
Nationwide The inventory of office buildings as of November 2016 was 20,528. The area of the office buildings, the construction of which was completed in 2016 3Q, was 314,000㎡ (81 buildings), which was a 42.5% (-38.2%) decrease compared to the end of last year.
10) Based on the General Building Register, as of Nov. 2016 (excl. public office facilities and office-tels)
80 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
Figure 1-56 Trends in the construction of office buildings
Number of buildings Area (㎡)
131 131 722,974 722,974 752,850 752,850 120 120 117 117 115 115 620,109 620,109 101 98 101 98 563,631 563,631 92 92 93 93 535,575 53553,567,552 9 536,529 545,788 545,788 85 85 88 89 88 89 79 79 81 81 459,767 459,767 77 74 77 74 439,548 439,548 384,415 38349,431,158 2 393,182 332,018 33321,041,080 0 314,000 280,713 280,7132 67,945 267,945
1Q 2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q 31QQ 2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q 3Q 2013 2013 2014 2014 2015 2015 2016 2016 2013 2013 2014 2014 2015 2015 2016 2016 Capital areaCapital area MetropolitanMetropolitan cities cities Capital areaCapital area MetropolitanMetropolitan cities cities ProvincesProvinces NationwideNationwide ProvincesProvinces NationwideNationwide
○ The number of office buildings that were built by the end of last year was 131 (545,788㎡), which was the highest during the time period under examination. The supply of new office buildings has been generally high every quarter in the provinces outside the capital area rather than the capital area, but there are more office buildings with a large area in the capital area.
○ With the heightened interest in commercial buildings as of late, the number of office buildings completed has been on the rise, with a new supply of office buildings with a total area of 188,923㎡ (30 buildings) in the capital area, 38,288㎡ (17 buildings) in the metropolitan cities, and 86,789㎡ (34buildings) in the provinces outside the capital area.
○ In terms of the supplied buildings (number of buildings), the supply of completed office buildings remained steady in the capital area compared to the previous year, whereas it increased by 21.4% in the five metropolitan cities and decreased by 55.3% in the rural provinces.
81 3) Retail Store Sales Transactions11)
Nationwide In the first half of last year (April to June 2015), there were 9,070 retail store sales transactions, which was the highest during the time period under examination. Since then, it has been on a continuous decline until the first half of 2016, when it showed a recovery. However, the transaction volume has been generally stagnant in the second half of the year.
○ Approx. 43% of the retail stores sold between July and Sept. 2016 were in Seoul, Incheon and Gyeonggi-do, indicating a concentration of transactions in the capital area (3,607 transactions), and this was a 9.8% increase from the end of last year.
○ In contrast, the sales transaction volume dropped overall in the non-capital area, with a 2.5% decrease in the five metropolitan cities and 6.2% decrease in the rural provinces since the end of last year.
○ In Sejong, the transaction volume increased due to steady supply. There were 92 sales transactions between June and Sept. 2016, which was the highest increase (76.9%) in the country since the end of last year.
Figure 1-57 Trends in retail store (building) sales transaction volume
10,000 9,070 8,781 8,468 9,000 8,172 8,166 8,281 8,361 7,722 7,360 7,506 7,293 8,000 6,850 7,150 7,000 5,855 5,935 6,000 5,000 4,000 3,000 2,000 1,000 - 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 2013 2014 2015 2016 Capital area Metropolitan cities Provinces Nationwide
11) This is based on the data on the actual transactions (sales transactions) of retail stores of general buildings (Class I and II Community Living Facilities, Sales Facilities, Recreational Facilites, etc. prescribed in the Building Act) for which the sales contracts were concluded by the end of Sept. 2016, that have been aggregated as of December 2016. The actual value is subject to change depending on the transactions that are registered at a later date.
82 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 1 Market Trends
4) Trends in Retail Store Supply12)
Nationwide The total inventory of retail stores was found to be 1,070,281, as of Nov. 2016, and the area of the retail stores that were built by 2016 3Q was 2,771,393㎡ (7,884 buildings), which was a 5.8% decrease from the end of last year.
○ The number of retail buildings built in the second half of 2015 (Oct.~Dec.) was the highest at 8,368 (2,640,452㎡). The supply of retail buildings, which was quite stagnant in the early 2016, showed a steady increase and recorded 1,224,712 ㎡ (2,554 buildings) in the capital area, 351,491㎡ (1,061 buildings) in the metropolitan cities, and 1,195,191㎡ (4,269 buildings) in the rural provinces in 2016 3Q.
○ The number of retail building built and supplied, compared to the end of last year, decreased by 4.1% in the capital area and 6.6% in the metropolitan cities. While the supply of retail buildings, based on the supplied area, increased by 30.3% in the capital area, it decreased by 16.3% in the metropolitan cities outside the capital area.
○ Supply decreased in all of the rural provinces, excluding Sejong (64 buildings, 28.0%↑) and Jeju (241 buildings, 1.7%↑), and thus the total supply in the rural provinces decreased by 6.5%
compared to the end of last year.
Figure 1-58 Trends in the completion of retail store construction
Number of buildings Area(㎡)
8,368 8,368 2,739,534 2,739,5342 ,664,291 2,664,291 2,771,393 2,771,393 7,882 7,882 7,731 7,731 7,884 7,884 2,483,890 2,483,890 2,538,063 2,5328,6,04603,4 52 2,640,452 7,538 7,538 7,264 7,264 2,373,102 2,373,102 2,341,998 2,341,998 6,724 6,724 6,605 6,605 6,934 6,934 2,228,450 2,228,450 6,112 6,112 6,189 6,189 6,448 6,448 1,937,544 1,937,544 2,176,291 2,176,291 2,129,795 2,129,795 5,930 5,930 5,983 5,983 1,942,342 1,942,342 5,178 5,178 1,862,029 1,862,029 1,598,595 1,598,595
1Q 2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q 31Q 2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q4Q3Q1Q4Q2Q1Q3Q2Q 3Q 2013 2013 2014 2014 2015 2015 2016 2016 2013 2013 2014 2014 2015 2015 2016 2016 Capital areaCapital area MetropolitanMetropolitan cities cities Capital areaCapital area MetropolitanMetropolitan cities cities ProvincesProvinces NationwideNationwide ProvincesProvinces NationwideNationwide
12) Based on the General Building Register, as of Nov. 2016
83 KAB Real Estate Market Report Korea Real Estate Market Report
P A R T 2 2017 Housing Market Outlook
Trend Category 2017 forecast 2015 2016 Changes in the residential property sales 3.51% 0.71% -0.2% prices (nationwide) (4.37%/2.73%) (1.32%/0.17%) (-0.2%/-0.4%) (capital area/non- capital area) Changes in the residential property jeonse prices 4.85% 1.32% 0.3% (nationwide) (7.14%/2.79%) (2.04%/0.67%) (0.4%/0.0%) (capital area/non- capital area) Changes in the residential 19.0% -11.6% -7.1% property sales transaction 119.4ten thousand 105.5ten thousand 98.0ten thousand volume (nationwide) units units units 2017 Housing Market Outlook
Lee Jiyeon, Shin Ranhee
In 2017, the housing market is expected to be reorganized centering on the actual end- users, while there will be a decline in speculative investment due to the possibility of interest rate hikes in Korea in line with the interest rate hikes in the U.S., the government measures taken for the rationalization of mortgages through household debt management, loan regulations and subscription market adjustments, and the boom of the pre-construction parceling-out sales market resulting from an increase in housing supply.
While the domestic economic growth rate in 2017 is projected to be around 2.5~3.0%, it is expected that the domestic and international economic uncertainties caused by the domestic economic slump resulting from the slowdown of the industrial economy and unstable domestic political-economic situation will be risk factors in the housing market.
As for the move-in ready housing supply, there has been an increase in the supply of pre- construction parceling-out sales of apartments since 2014, and it is expected that the number of move-in ready homes will rise this year and next year. In some of the regions, it is possible that the housing prices will undergo an adjustment due to the supply-and-demand imbalance resulting from the growing volume of unclaimed new residential properties. However, there has been consistently new demand from the growing number of single- member and two-member households as well as potential demand arising from housing demolitions and replacement of decrepit homes; thus, it is expected that the supply-and- demand imbalance will occur in only some of the regions.
86 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 2 Real Estate Market Outlook in the Second Half of 2016
Residential Property Sales Market The U.S. Federal Reserve interest rate was hiked (0.25%) in December 2016, and an announcement was made in regard to the plans to raise the interest rate three times a year until 2019 for a total of 9 times. Accordingly, there is a high probability that the benchmark interest rate will be raised in Korea, which is expected to cause cooling of the housing market. Amidst this situation, it appears that the persistent domestic and international economic uncertainties as well as the recent real estate restriction policies such as household debt management, loan restrictions and subscription system adjustments will be as risk factors that cause a downtrend in the residential property sales market.
○ In the capital area, the pre-construction parceling-out sales market will continue to cool down centering on the regions directly impacted by the real estate regulation measures announced on Nov. 3. Even in the case of existing housing, the market is expected to shift toward a downward stabilization trend due to the economic situation at home and abroad. While there will be housing demand by the end-users in some of the more in-demand areas, a downward stabilization trend is expected to be observed in the Gyeonggi-do area in the outskirts of Seoul.
○ As for the non-capital area, residential property prices are expected to rise in a localized fashion in the areas with favorable conditions for long-term development such as Jeju (construction of a second airport), Busan (redevelopment of the North Port), and Gangwon (hosting of the Winter Olympic Games). In contrast, the sales prices are expected to fall in areas with a supply-and-demand imbalance resulting from the new housing supply such as in Gyeonggi, Chungnam and Chungbuk.
Residential Property Jeonse Market This year, there will be areas with a large number of homes on the market for jeonse due to the localized increase in the number of move-in ready homes. Depending on the supply-and-demand situation, there will be a noticeable polarization phenomenon occurring among the regions. It is projected that the jeonse market will continue to show a stabilization trend without any significant rises in prices, as the downward stabilization trend continues in the sales market and new move-in ready homes are put out on the market.
87 Residential Property Sales Transaction Market Mortgage interest rates have been climbing since late last year due to the probability of a hike in the domestic benchmark interest rate rising as a result of a hike in the U.S. interest rate as well as the announcement of the household debt management and loan restriction policies. This will increase the financial burden to purchase and maintain homes. Also, the growing economic uncertainties at home and abroad arising from the economic slowdown, there is a possibility that potential buyers will take on a wait-and-see stance when it comes to buying a home. Thus, the housing transaction volume is expected to be lower compared to last year. The recovery period for the residential property sales transaction market will be determined based on the time point and level of the interest rate hike and the changes in the domestic economic situation.
As for the 2017 housing market outlook, a metric method, through which an econometrics model was reviewed at multiple angles, was used, and a presumption predicated on the forecasts on the real estate policy and domestic and international economic situations was included in the model.
○ More specifically, predictive values were considered based on a presumption of an endogenous relationship between the housing market and the macroeconomic variables, and a conservative approach was made, taking into account the possibility that the domestic and international conditions will worsen (interest rate hikes, persistence of domestic and international economic uncertainties, etc.)
88 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 2 Real Estate Market Outlook in the Second Half of 2016
Table 2-1 Summary of the changes in the housing market in 2015~2016 and forecasts for the housing market in 2017
Trends Category 2017 forecast 2015 2016 Changes in the residential property sales prices (nation- 3.51% 0.71% -0.2% wide) (4.37%/2.73%) (1.32%/0.17%) (-0.2%/-0.4%) (capital area/non-capital area) Changes in the residential property jeonse prices (nation- 4.85% 1.32% 0.3% wide) (7.14%/2.79%) (2.04%/0.67%) (0.4%/0.0%) capital area/non-capital area) Changes in the residential 19.0% -11.6% -7.1% property sales transaction vol- 119.4ten thousand units 105.5ten thousand units 98.0ten thousand units ume (nationwide)
* The residential property sales transactions volume for the month of December (2016) was not confirmed; thus, an estimated volume was used instead
Based on the estimation results for the 2017 outlook, the nationwide residential property sales prices are projected to drop by 0.2%, while the residential property sales prices are expected to fall by 0.2% in the capital area and 0.4% in the non-capital area. Meanwhile, the jeonse prices will rise by 0.3% nationwide and 0.4% in the capital area, whereas it will remain steady in the non-capital area (0.0%).
The total residential property sales transaction volume in 2017 is expected to be around 980,000, which is a 7.1% (75,000 transactions) decrease compared to last year (approx. 1.055 million).
89 KAB Real Estate Market Report Korea Real Estate Market Report
P A R T 3 In-Depth Analysis
Analysis ① | Risk Diagnosis of Domestic Household Debts and Response Measures Analysis ② | The Population Aging and Housing Transactions :Evidence From the Real Estate Trade Management System Data Analysis ③ | Diagnosis of the 2016 Housing Subscription Market Analysis ④ | Analysis of Patterns in the Determinants of Housing Prices 1 Risk Diagnosis of Domestic Household
Analysis Debts and Response Measures
Lee Junyong
1. Introduction
The domestic household debt, which had amounted to approximately KRW 180 trillion during the 1997 Asian financial crisis, grew to around KRW 630 trillion 10 years later in late 2007, and it is now expected to exceed KRW 1.3 quadrillion by the end of 2017. The current level of domestic household debt may not be comparable to the past levels, considering that loan regulations were in place, and the loan market had not grown back in the day. However, it should still be noted that the loan and financial markets have undergone dramatic growth in the past two decades. Under the current circumstances, the economy is highly sensitive to external shocks, unlike during the financial crisis around 20 years ago, and the loan market has grown substantially in size. For these reasons, it is essential that an accurate diagnosis of the size and structure of debt be made. Of particular note, tension has intensified even further due to the external uncertainties arising from the U.S. Federal Reserve’s plans to issue series of interest rate hikes in addition to the one last year. In this section, the external economic risk factors that have been on the rise will be noted in addition to diagnosing the risks associated with the domestic household debt and establishing the corresponding response measures. The basic diagnostic framework will include an international comparison, an analysis of the level and structure of household debts in Korea, and determination of the characteristics of households with debts. Through this process, we will be able to test our fitness to counter the external economic risk factors and diagnose our
92 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 3 In-Depth Analysis
weaknesses, and it will be possible to use the data and knowledge produced from this process as basis for establishing various response measures.
2. Why is the domestic household debt of Korea considered to be at an international risk level?
1) Korea’s domestic household debt is growing at the fastest speed in the world
One of the most widely accepted and commonly used indices worldwide is the “disposable income-to-debt ratio.”
93 Figure 3-1-1 Household debt-to-net disposable income and GDP ratios by time period
a. 2014
350
) Denmark
( % 300 350 Netherlands m e o c
) Denmark n I
( % 250
e 300 l Norway Netherlands b m e a
o Australia s c o n p I
s 220500 i e
l NSowrwedaeyn b Switzerland t D a Canada Australia e s Korea o N p 150 Japan
s 200 i t o Spain SwUenditeend Kingdom t France
b Switzerland t D
e Canada e Korea Portugal Italy D N 110500 GJraepeacne d l t o Czech Republic Spain
o United Kingdom t
h France
b United States e
e Germany s Portugal
u Italy D 50 Poland Greece
o 100 d l
H Czech Republic o
h United States e Germany s
u 500 Poland o
H 0 20 40 60 80 100 120 140 Household Debt to GDP(%) 0 0 20 40 60 80 100 120 140 Household Debt to GDP(%) b. 2008 350 Denmark )
( % 300 350 Netherlands Denmark m e o c ) n I
( % 250
e 300 l Netherlands b m e a
o Norway s c
o Portugal n Australia p I
s 220500 i e l
b Sweden
t D Switzerland a Norway e s Canada United Kingdom o Japan Portugal
N Australia p 150
s 200 i t o
t Sweden b t D Greece Korea Spain Switzerland e e France Japan Canada UniUtendit Sedta Kteinsgdom D N 110500 d Italy l t o o t
h Czech Republic b
e Greece GerKmoraenay Spain e
s France United States u
D 50
o 100
d Italy l H o
h Czech RepubPloicland
e Germany s
u 500 o
H 0 20 40 60 80 100 120 140 Poland Household Debt to GDP(%) 0 0 20 40 60 80 100 120 140 Household Debt to GDP(%)
Source: OECD, BIS
discerned. The countries where the household debt-to-GDP ratio surged include Switzerland (18.1%p), Norway (17.2%p), Sweden (14.6%p), Australia (12.6%p), Canada (11.9%p), and Greece (8.0%p), while the countries that saw a surge in the household debt-to-disposable income ratio include Greece (27.9%p), Norway (17.1%p), Switzerland (17.3%p), Australia (16.7%p),
94 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 3 In-Depth Analysis
Canada(16.4%p), and Sweden (14.0%p). In Korea, in particular, the household debt-to-GDP ratio rose by 10.1%p , and the household debt-to-disposable income ratio by 20.9%p. On the other hand, the countries that saw a significant drop in the household debt-to-GDP ratio in the same period were the United States (-15.2%p), Spain (-9.5%p), and Portugal (-7.5%p), and the countries where the household debt-to-disposable income declined were Denmark (-34.5%p), Spain (-22.9%p), the United States (-21.8%p), and the United Kingdom (-14.8%p). In summary, the household debt of Korea increased at one of the fastest rates in the world in the period above, and it has continually risen thereafter. Thus, it is deemed that the size of the domestic household debt and the speed at which it has been increasing are at dangerous levels. Also, mortgages in Korea are typically taken out as short-term loans with a grace period and variable interest rates, and the risk associated with this loan structure may act as another risk factor.
2) Low capacity to manage household debt compared to income
The debt service ratio (DSR) level of Korea is the lowest among the countries with low capacity to manage debts, and high among the countries with high capacity in relation to income. As for the long-term trends, the DSL level was 8.7% in 2000, indicating a very good loan soundness, but it increased to 11.2% in 2007, and underwent a steady uptrend and
Figure 3-1-2 DSR trends in major countries
a. Countries with low income capacity compared to debt size b. Countries with high income capacity compared to debt size
252.50.0 252.50.0
202.0.0 202.0.0
151.50.0 151.50.0 101.0.0 101.0.0 5.50.0 5.50.0 0.0.0 `0`000 `0`202 `0`404 `0`606 `0`808 `1`010 `1`212 `1`414 `1`616 0.0.0 AuAsutsratrliaalia CaCnaandaada JaJpaapnan `0`000 `0`202 `0`404 `0`606 `0`808 `1`010 `1`212 `1`414 `1`616 KoKroeraea NeNtehtehrelarnladnsds ItaItlyaly GeGremrmanayny SpSapinain SwSewdeednen
Note: The Bank for International Settlements (BIS) publishes a report on DSR every quarter. DSR for the household sector includes data on the general households and non-profit organizations. The annual numbers are based on the data from the end of the first quarter. Source: BIS
95 downtrend from thereon until it returned to the pre-global financial crisis level of around 11.1% at the end of the first quarter of 2016. Generally speaking, the debt soundness of Korea is not very good, compared to the advanced nations, and considering the continuous increase in the size of the domestic household debt, it is deemed necessary to put forth an effort to improve the soundness of debts.
3. What are the causes of the increase in the domestic household debt?
1) Increase in mortgages caused by the easing of loan regulations
At the end of the second quarter of 2008, prior to the subprime mortgage crisis and the bankruptcy of Lehman Brothers, the domestic household debt was KRW 660.8 trillion, and mortgages amounted to KRW 229.7 in total, with KRW 248.7 trillion loaned from deposit banks and KRW 51.0 from non-deposit banks. Of the total household debt, mortgages account from approximately 45.4% (KRW 229.7 trillion/KRW 660.8 trillion). The domestic household debt increased by 1.8-fold to KRW 1,191.3 trillion by the second quarter of 2016, and KRW 527.2 trillion was in mortgages. As such, household debts nearly doubled within 8 years.
Table 3-1-1 Balance by household debt type
`08(A) `09 `10 `11 `12 `13 `14 `15 `16(A) (B)/(A)
Total household debt 660.8 700.1 756.9 826.9 875.0 926.3 978.4 1,072.0 1,191.3 1.8
De- Mortgages 248.7 266.5 280.6 299.2 312.4 321.2 338.3 372.2 420.1 1.7 posit banks Other loans 128.2 133.8 138.3 145.1 145.5 149.4 151.3 155.0 166.6 1.3
Non- Mortgages 51.0 58.0 68.5 77.5 85.0 85.8 93.7 94.6 107.1 2.1 deposit banks Other loans 67.0 69.3 79.3 92.8 102.9 110.0 121.9 138.1 159.5 2.4 Other financial insti- 165.9 172.4 190.1 212.3 229.2 259.9 273.2 312.1 338.0 2.0 tutions Note: 1) Balance at the end of 2Q every year 2) Non-deposit banks include mutual savings banks, credit unions, mutual finance service institutions, MG KFCC, Korea Post, etc. Source: Bank of Korea
96 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 3 In-Depth Analysis
Figure 3-1-3 Annual trends and distribution of the amount of increase in the loan balance by type of household debt
2016 47.9 11.6 12.5 21.4 25.9 119.1
2015 33.9 3.7 16.2 38.9 93.6
2014 17.1 7.9 12.0 13.3 52.1
2013 8.8 4.0 7.0 30.7 51.3
2012 13.2 7.5 10.1 16.9 48.1
2011 18.7 6.7 9.0 13.5 22.1 70.0
2010 14.1 4.5 10.5 10.0 17.7 56.8
2009 17.7 5.6 7.0 6.6 39.3
0 20 40 60 80 100 120 trillion KRW
ortgages from deposit banks Other loans from deposit banks Mortgages from deposit banks Mortgages from non-deposit banks Other financial institutions Note: The amount of increase in the loan balance was calculated based on the YOY increase at the end of 2Q each year. Source: Bank of Korea
As for the loan accounts with a loan balance from the highest to lowest in the same period, it is “other loans” and “mortgages” from non-deposit banks, and “mortgages” and “other loans” from other financial institutions including insurance agencies and deposit banks. For a comparison of the level of increase in household debts, the trends in the annual increase in the loan balance by household debt type are shown in
97 results of an analysis revealed that the latter was caused by a balloon effect resulting from the implementation of far more stringent loan reviews in the banking sector. In addition, household loans from other financial institutions saw a YOY increase of KRW 38.9 trillion in the second quarter of 2015 and KRW 25.9 trillion in the second quarter of 2016, and this is deemed to have resulted from the increase in policy-based mortgage loans from the Korea Housing Finance Corporation. The amount of increase in the loan balance of other financial brokerage firms was KRW 29.2 trillion and KRW 11.0 trillion in the same periods.
2) An increase in mortgages primarily in the capital area and metropolitan cities
The mortgage balance in the second quarter of 2016 was KRW 527.2 trillion in total, with KRW 328.3 trillion in the capital area, KRW 101.7 trillion in the five metropolitan cities, and KRW 97.2 in the provinces outside the capital area. As such, more than half is concentrated in the capital area, and it could be said that most of the mortgages (81.6%) were taken out in large cities including the five metropolitan cities. However, considering that the capital area and the five metropolitan cities accounted for 86.0% of the total mortgage balance in 2008, it is deemed that the ratio of the mortgage balance of large cities to the total mortgage balance is decreasing, while the ratio of the mortgage balance of provinces to the total mortgage balance is on the rise.
Figure 3-1-4 Trends in the balance and amount of increase in mortgages by region and year
a. Trends in the mortgage balance by year b. Trends in the amount of increase in mortgages by year
600 45.0 42.5 42.5 600 527.2527.2 45.0 40.6 40.6 501.2501.2 460.6460.6 500 500 11.3 11.3 418.1418.1 97.2 97.2 9.5 9.5 392.0349024..02404.2 92.7 92.7 29.2 29.2 362.8362.8 83.2 83.2 27.3 27.3 400 400 338.5338.5 30.0 30.0 26.0 26.0 64.7 6741..79 71.9 101.7101.7 24.3 24.3 311.2311.2 57.8 57.8 96.7 96.7 9.5 9.5 50.5 50.5 87.2 87.2 2.6 2.6 7.3 7.3 9.8 9.8 46.1 46.1 64.9 6741..90 7717..04 77.4 2.0 2.0 4.6 4.6 trillion KRW trillion KRW trillion KRW 300 30403.5 43.5 56.5 56.5 trillion KRW 4.3 4.3 51.6 51.6 5.0 5.0 49.6 49.6 4.9 48.9.4 8.4 13.9 13.9 200 200 15.0 15.0 12.2 12.2 311.8331218..83328.3 22.7 22.7 255.9225659..94226698..45226688..58226980..82290.2 67.9.2 72.12. 3 2211.3.7 21.7 218.0221480..08240.8 6.9 16.5 16.5 100 100 15.1 1153.1.5 13.5 6.1 66.1.4 6.4 0 0 0.0 0.0 0.3 0.3 `08 ``0089 ``0190 ``1101 ``1112 ``1123 ``1134 ``1145 ``1165.6`16.6 `09 `0`190 `1`101 `1`12 `1`123 `1`134 `1`145 `156.6`16.6 CapitalCapital area area5 metropolitan5 metropolitan cities citiesRural areasRural areas CapitalCapital area area5 metropolitan5 metropolitan cities citiesRural areasRural areas Note: Mortgage balance determined at the end of the year Source: Bank of Korea
98 Korea Appraisal Board Korea Real Estate Market Report(2016 Real Estate Market Trends and 2017 Outlook) P A R T 3 In-Depth Analysis
3) An increase in loans to pay for everyday living costs