GDP 3time Korea realestate, factors leading to the rise and fall
Ranking of countries by stock market capitalization relative to GDP
| nation |
Stock market capitalization relative to GDP
|
| USA | 2.5 times |
| korea | 2.1 times |
| china | 1.8 times |
| japan | 1.7 times |
| uk | 1.6 times |
| Canada | 1.5 times |
| australia | 1.4 times |
| france | 1.3 times |
The stock market capitalization relative to GDP in the United States is 2.5 times higher than in Korea. In the United States, stock holdings are higher than in Korea due to the pension system, so it is natural that the market capitalization relative to GDP is high. Also, I think this is because in the U.S., companies that will lead future global growth, such as big tech, are receiving high valuations.
Ranking of countries by housing market capitalization relative to GDP
| nation |
Housing market capitalization relative to GDP
|
| korea | 3.2 times |
| USA | 2.2 times |
| china | 1.9 times |
| japan | 1.6 times |
| uk | 1.5 times |
| Canada | 1.4 times |
| australia | 1.3 times |
| france | 1.2 times |
Percentage of urban residence by country
| nation | Percentage of urban residence |
| korea | 92.30% |
| USA | 82.70% |
| china | 68.60% |
| japan | 91.30% |
Housing market capitalization compared to Korean GDP by year
| year |
Housing market capitalization relative to GDP
|
| 1997 | 1.4 times |
| 2000 | 1.6 times |
| 2005 | 1.8 times |
| 2010 | 2.0 times |
| 2015 | 2.2 times |
| 2020 | 2.4 times |
| 2021 | 2.8 times |
| 2022 | 3.0 times |
| 2023 | 3.2 times |
Number of housing sales by year in Korea
| year | number of homes sold |
| 1997 | 206,800 |
| 1998 | 188,500 |
| 1999 | 218,800 |
| 2000 | 249,300 |
| 2001 | 251,100 |
| 2002 | 247,500 |
| 2003 | 236,900 |
| 2004 | 238,600 |
| 2005 | 243,100 |
| 2006 | 252,900 |
| 2007 | 274,300 |
| 2008 | 284,700 |
| 2009 | 249,400 |
| 2010 | 274,000 |
| 2011 | 282,800 |
| 2012 | 283,800 |
| 2013 | 279,600 |
| 2014 | 282,700 |
| 2015 | 286,600 |
| 2016 | 287,600 |
| 2017 | 283,600 |
| 2018 | 282,700 |
| 2019 | 278,400 |
| 2020 | 254,800 |
| 2021 | 290,900 |
| 2022 | 307,200 |
| 2023 | 318,700 |
Population and population density by region
The ratio of housing market capitalization to GDP is higher in Korea than in the United States, China, and Japan. The reason why real estate in Korea is expensive, twice that of Japan, is because most of the assets are invested in real estate and real estate is purchased through enormous household loans. And the jeonse system, which cannot be found in other countries, is also contributing to the rise in housing prices. In addition, because the proportion of the population living in the city center is overwhelmingly high, there is a phenomenon of people buying houses competitively, obsessed with the fear that if they do not buy their own house one step ahead of others, prices will rise and they may not be able to afford it forever. This can only prevent excessive increases in housing prices by first addressing the problem of 50% of the total population living in the metropolitan area and Seoul. I believe that overcrowding in the metropolitan area is having a big impact on the falling birth rate due to excessive housing prices.
The price has recently risen sharply to 3.2 times, but has recently fallen slightly to 2.9 in January 2024. After an initial decline in the upward trend, it rebounded slightly due to government policies in October.
If we summarize the factors for price rise and fall in 2024, we can see
price increase factors
1. Overcrowding in the metropolitan area (Gyeonggi 13.02 million in 2018 -> 13.68 million in 22, 23 statistics tbd)
2. Rising costs of home construction (increasing wages and raw material costs)
3. Expected future benefits from reconstruction
4. Improvement of infrastructure in the metropolitan area (subway/transportation/amenities, etc.)
5. Jeonse system
6. Various housing mortgage loan benefits (low-interest loans for newborns, ultra-long-term loans, etc.)
7. Increase in single-person households
8. Elimination of housing floor area ratio regulations
price decline factors
1. Decrease (maintain) birth rate
2. High interest rates
3. Rising reconstruction costs (decreasing future value)
4. Maximum new housing construction (average of 264,000 units in 1997-23, 318,000 units in 2023)
5. Real estate taxation policies and regulations (heavy taxation for multiple homeowners, overheated speculation districts, etc.)
Summarizing various data, the factors causing the price decline may be temporary. If the current inflation, which acts as a factor in price declines, is controlled, high interest rates will be resolved, and raw material and construction costs may fall accordingly. Housing construction in 2024 is also starting to decline.
So, will any of the factors causing price increases be resolved? The current government is loosening real estate regulations and indirectly neutralizing high interest rates on real estate. Because none of the factors causing price increases are resolved, prices will eventually fall in the short term, but in the long term, the factors causing decline will be resolved and only factors remaining will increase.
If house prices don't rise, everyone is happy. You can live in a good house at a low price and have room to spend on other things. Neither you nor I need to be pushed into buying a house. Overcrowding in the metropolitan area ultimately created Gangnam’s real estate invincibility. To solve this problem, infrastructure must eventually be transferred to local areas and jobs must be created.