South Korea's Jeju Island has been on fire again recently. There are tens of thousands of tourists stranded at Jeju Island airport which raised concern, also the South Korean government released last year's housing price data and it caused Jeju Island to appear in the headlines even more. Jeju Island land and house prices rose at a fast rate far more than the inch of land in Seoul. A Korean media outlet dubbed Jeju Island as a "volcano" as it has a dormant volcano, Mount Halla.
Ms. Kang, a native resident of Jeju Island, said she recently gave up the dream of owning a house of her own. A villa she fell in love with two years ago was available for just over 100 million won ($600,000), but now it is not available even for three billion won. Ms. Kang exclaims, "I'm more worried about my rent now than the price of my house, which has doubled from before. Land prices on Jeju Island can only be described as crazy."
The Korea Appraisal Institute released the results of a national house price survey on 3rd January, showing that the number of residential transactions in South Korea last year is estimated to have reached 1.2 million units, which is the highest since 2006 (1.08 million units). Jeju's house prices rose the most last year at 8.08%, which is twice of Seoul (4.60%) and Gyeonggi Province (4.47%).
The rapid growth of Jeju's real estate industry can be seen in the major survey released by the Korean government.
As reported by ”Jeju Voice“ on 17th February 2015, citing data from the Korea Appraisal Institute and the Ministry of Land, Infrastructure, Transport and Tourism, residential transactions are high. The number of residential transactions for the year was nearly 20,000, equivalent to an average of 55 transactions per day, an increase of 24.6%. In 2006, Jeju Island’s residential total number of annual transactions was just over 4,000 units, up five times in 10 years. Out of these properties, 43.4% were apartments and 23.4% were villas. The total transaction price is high; based on data from the end of December 2015, the average total residential transaction price was 188.87 million won (1 million yuan), an increase of 30 per cent compared to the same period in 2014. The average transaction price of condominiums was even higher at $228.35 million won (RMB1.21 million), up nearly 50% from the same period last year, an increase of nearly six times of the 8.8 per cent increase in the same period across Korea.
And according to the Korea Daily News, using 1st Jan 2016 prices as a benchmark, the price of a villa sold on Jeju Island was 3.7 times more a year ago. According to the South Korean Ministry of Land, Infrastructure, Transport and Tourism's announcement on 22nd of this month, Jeju Island's public land prices have risen as compared to the same period last year. Meanwhile, the average increase in the nation's land prices was 4.47%. In several areas within Jeju Island, land prices have risen even more than 40%. Why has real estate on Jeju Island been extremely popular in the past two years? From the Korean media, "China buying", "Influx of people from inland Korea" and "Need for speculation" are the keywords. According to an analysis by local media, one of the reasons for the booming property market in Jeju is the strong demand for housing in South Korea, which has been triggered by the country's relocation to Jeju.
According to the Korean Daily News, many Koreans attribute the surge in land prices to the "China effect". “Investors from China tend to focus on buying apartments only in previous years, have recently expanded their investments to include small and medium-sized hotels, shops and even restaurants," he said. This trend is also related to the increasing number of Chinese tourists visiting Jeju Island.
According to the report, the construction plan for Jeju's second airport, which was released late last year, has also become one of the major triggers for rising land prices. Shim, who stays near the area where the second airport is planned, said, "It used to be 800,000 won for one ping (3.3 square meters) of land. In the future, real estate developers will have to spend at least two to three million won to get a ping of land."
The report also analysed the increasing influx of foreigners has caused the real estate market to soar. Lee Hyo-lee, Park Ji-Sung and other Korean showbiz and sports stars have moved to Jeju Island one after another, dreaming of idyllic island life in South Korea. The continuous inflow of people to Jeju Island to settle down has stimulated the demand for real estate. The net inflow of people going to Jeju returned to positive territory in 2010, and in 2014 the net inflow of people exceeded the 10,000 people mark for the first time. Just one year later in 2015, it reached 14,000 again breaking another record. In 2015, Jeju’s average residential house sales price ($188.87 million) was up 33.2 per cent from 2013, more than six times the national rate of 5.1 per cent increase.
In fact, not only in Jeju Island, most of the South Korean people have the first-hand experience of high housing prices. Developed areas such as Seoul have long reached the high housing price range with limited increases, and despite the unabated demand for housing, many residents on the background of high housing prices, choose to hold on to their money or give up on their home purchase plans. February saw the first slight drop in home prices across South Korea in over a year for 0.01 per cent, but most South Koreans don't think the era of high prices will pass. According to a survey released by the Korea Housing Finance Corporation on 18th February 2016, four out of 10 South Koreans believe that prices will rise in a year's time.
The Korea Housing Finance Institute of the Korea Housing Finance Corporation reportedly conducted a nationwide survey to 7000 families from August 2015 to January 2016.
They found that more than 40% of the 5,000 average households believe that housing prices will increase in a year. The age and class distribution was 56.6 per cent of people in their 20s, 44.8 per cent of families who did not own properties, and 40.3 per cent of Seoul residents. In contrast, 38% of residents believe that house prices will remain the same.
House Price Expectations Rise every year since 2013
According to a Korean media outlet, the local government in Jeju province is taking measures to cool down the real estate market. A South Korean real estate insider warned, "This year Jeju Island will still be a hot area for real estate investors, but it does not mean that the demand is high." As the property bubble is rising, foreigners who are unfamiliar with Jeju should be clear with their purchase goals, especially if they are looking to buy property on the island. Extra care must be taken when investing."
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