The International Monetary Fund (IMF) warned that real estate prices in Korea rose significantly during the COVID-19 period and that a significant drop is expected in the future.
The IMF released a report titled “Housing Market Stability and Affordability in the Asia-Pacific Region” on the 15th (local time).
The IMF paid attention to the housing market in the Asia-Pacific region because it believed that the housing market, which was fluctuating and especially enjoyed the COVID-19 boom, could be reversed amid an evaluation of housing prices and a rise in interest rates.
According to the report, among the 11 major countries in the Asia-Pacific region, New Zealand saw its real estate prices soar the most between the fourth quarter of 2019 and the fourth quarter of 2021.
Next, Australia recorded an increase of around 23%. In third place, Korea real estate jumped around 18 percent.
Japan and Singapore showed an increase of around 10%, while Thailand and China showed an increase of around 5%. Hong Kong is up around 3%. Indonesia, the Philippines, Malaysia and India, on the other hand, fell backwards.
The IMF explained, “The surge in prices in major countries in the Asia-Pacific region during the Pandemic period was promoted by low mortgage rates due to the central bank’s easing monetary policy along with demand and supply factors by country.”
The report then investigated how likely housing prices will fall in the future.
The report said that as of the fourth quarter of 2021, the downside risk of rising housing prices has increased significantly.
Housing price growth after the fourth quarter (after the fourth quarter of 21) is likely to fall by 20% points in New Zealand compared to the early stages of COVID-19.
Korea and Australia are expected to fall by about 10 percentage points, respectively.
The report predicted that the decline would be greater if interest rate hikes were added.
The IMF said, “The data based on this analysis was from the fourth quarter of 2021, when interest rates were still low in most Asia-Pacific countries,” adding, “Because high interest rates lower housing prices, future interest rate hikes will add to the downside risk of housing prices.”
Regarding the impact of housing prices due to interest rate hikes, the IMF said, “A 3 percentage point rate hike in major Asia-Pacific countries will lower housing prices by more than 5% over the next 8 quarters (two years).”
In addition, the IMF predicted that a 3%-point rate hike in the fourth quarter (one-year) will lower housing prices by about 2%.
The IMF said, “The financial sector of major and developing countries in the Asia-Pacific region looks healthy and is expected to remain resilient despite such shocks,” but added, “close supervision is needed to identify risk factors early.”
