Korea's housing bubble is anticipated to ease gradually in 2024 after years of surging house prices, according to analysts, Friday.
Speculation was backed by house price-linked stats, a diminished wealth gap between the rich and the poor, a downturn in Seoul's house prices for the first time in six months and high interest rates.
"I would not say house prices will plummet, but one thing I can say for sure is that the housing bubble will shrink by a significant level by the beginning of the second half in 2024," said Kwon Dae-jung, a real estate professor at Sogang University.
He noted the diminished wealth gap, as jointly addressed by Statistics Korea, the Bank of Korea (BOK) and the Financial Supervisory Service (FSS) in their data, Thursday, indicates that house prices have potentially peaked.
The data showed the average value of assets of the bottom 20 percent of earners in the income bracket increased 12.7 percent year-on-year in 2023, while that of the top 20 percent decreased 4.2 percent over the same period.
The drop in wealth of the rich, according to Kwon, comes as the prices of expensive homes have been falling.
"The value of a home takes up a great portion of individual wealth in Korea, and in that regard, the rich-poor wealth gap is a clue to forecast the 2024 housing market," Kwon said.
Speaking on condition of anonymity, a private wealth manager of a commercial bank said the sign of a shrinking housing bubble is visible in the latest apartment price trend in Seoul.
In a data released Thursday, the Real Estate Board said prices of apartments, the most popular form of housing in the country, inched down 0.01 percent from the previous week in the first week of December.
It marked the first fall since the third week of May.
"The housing market is on track to normalization after devastating housing policy failure under the previous government that resulted in skyrocketing house prices," the manager said.
Lee Sang-ho, head of the economic policy team at the Korea Economic Research Institute (KERI), said high interest rates will also cause the housing bubble to shrink in 2024.
"The high key interest rate is likely to remain unchanged in the first six months of 2024, as the drastic rate cut, compared to a drastic rate hike, can have a more negative effect on people's livelihoods and the economy," Lee said.
He was referring to the Bank of Korea (BOK) keeping the policy rate steady at 3.5 percent since January. The rate stands at a more than 14-year high after the BOK carried out aggressive monetary tightening in August 2021 to bring back the rate to the pre-pandemic level.
"Would-be homeowners are likely to wait and see for the rate to fall, and such an approach will contribute to the gradual easing of the housing bubble," Lee said.