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Home / korea / [이코노미스트] When interest rates fall and house prices stabilize, the existence of the charter seems to disappear

[이코노미스트] When interest rates fall and house prices stabilize, the existence of the charter seems to disappear



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Korea and Bolivia Decrease in Global Medicines … Rising house prices are a backdrop to the survival of the charter

End of things that Jo Won-Kyung wants to know (2) Will the charter system disappear?

Bolivia real estate trading site. / Photo: Yonhap News, Ultra Casa

Bolivia real estate trading site. / Photo: Yonhap News, Ultra Casa

Seoul home prices continue to rise and Daejeon's home price rises pierced the sky. Ulsan housing prices, which only dropped, also stopped falling. Seoul prices, which only go up, seem too heavy to climb, but it's not easy to say where it is going. If there is time to go up, there is time to go down. When is the problem? Gangnam's house in Seoul has become an object that cannot be had by ordinary salary. Even though the charter was cheap, it was very fortunate that the charter of the new house was not good enough and the charter of the rebuilt green apartment was cheap but not comfortable to live in. As a child, I was surprised to see that charter. Even if I explain the charter system to strangers, I'm curious about what the system is. It is natural for those who are used to renting to get so much money back to their landlords. In high interest rates, the charter is a meaningful system. The loan was made by a private bank, but can be profitable by leaving only the bank.

Charter during high interest rates is very meaningful

Let's look briefly at the structure of the charter. The ultimate goal is for the homeowner to lend money to the owner without interest and stay at home instead. A homeowner who accepts money as a mortgage is a kind of concept that uses money to make a profit while the tenant uses the house.

In general, charter prices are inversely proportional to the interest rate. Usually, if interest rates are low, you have no choice but to raise the charter price. In rising house prices, the owner can buy a house with the rent he has bought. This is a type of loan without interest. The charter system is not a problem when house prices rise, but it can cause problems when it goes down. When house prices fall, landlords can admit that it is a loss because the tenant provides his property utilities at a very low cost. When house prices go down, there is a reversal, and the owner cannot afford to pay rent, and if he even invests in another place with rent, the pain multiplies. In this case, a lawsuit can occur, which can be a social problem.

When house prices don't go up, it isn't too long before I get more rent or convert to rent. Therefore, the trend of not buying a home causes an increase in the charter. Even the media have been told that the house has exceeded the price of a house. What happened years ago sounds like an old story.

In this case, it might be wise to sell your house if you ignore the assumption that house prices will always go up. But in reality, buying and selling a house will be expensive if there are many transactions and the continuation goes up. The pre-sale market boom in 2015 is due to the fact that bored tenants jumped leases jumping into the pre-sale market rather than expecting a rise in house prices. At that time, house prices have stagnated or fallen, and demand for renting homes through pre-sales continues to increase in lieu of a high charter.

Analyzing the relationship between household income and type of home, the higher the level of income, the higher the level of entrepreneurship. The lower the income, the greater the share of rent and rent guarantees. Low income earners don't like rent, but don't have to pay high rent. The owners of downtown Seoul prefer renting with good cash flow, so if someone wants to buy a house, they should choose to rent or eat a house with weeping and mustard. The Seoul housing market is often summarized as higher rent, lower rent and polarization of housing levels. As old houses grow, slums will begin to appear one by one, and these areas will become spaces where low-income families gather. If low interest rates continue, there is a chance that busy downtown Seoul will be divided into self-rented and self-centered markets.

Low-income households can choose to eat mustard while crying

As a result, even if house prices do not rise, the ability to buy a home even if they are able to pay off bank loans can increase. Except for monthly rent, which requires monthly payments to the owner, there is no other choice but to increase the demand for housing. Unlike other countries that are used to renting, the charter does not appear to be burdensome (unless you think the amount is large), while the rent seems to have been cheated by the owner. Even in Japan, the housing market has experienced a long-term decline, but demand for new apartments continues to increase. Existing housing transactions are on the decline, but demand for new apartments has increased. As the level of nominal housing supply continues to increase, statistics show that housing remains. However, there is still a shortage of quality housing to ensure a comfortable life. This is the biggest reason why I think that demand for new apartments will continue to increase. One-bedroom apartments in Manhattan are not expensive. The reward will leave a large house accident on the outskirts of town, which does not appear to be a matter of personal choice. Real estate properties in popular areas with limited inventory cannot be ignored. Needless to say, rent is expensive where houses are expensive. Think about how many young Wall Street kids will live in Manhattan.

Housing prices in Paris continue to rise because of people outside of Paris. The limitations of tall buildings and aristocratic history require Paris to be more expensive to live in, even if a house is built around it, even if you have lived there or lived there for a while, Psychology can work in the real estate market.

The fact that real estate acts as the status quo is another reason for the high cost of housing in popular areas. In the UK, where the Industrial Production Index did not return to pre-crisis levels, home prices far exceeded the global financial crisis. What is the reason? This is because of the phenomenon of "parking assets" in which rich people in developing countries store their assets in safer developed countries. In Vancouver, the love of Chinese real estate made them pay special taxes. Increased tax on foreign real estate acquisition in Canada is the result of such a system. It is known that China's big hands have raised real estate prices in the world.

Is the charter system only in Korea?

In conclusion, the Korean charter system has functioned as a system to secure capital gains through small investments to tenants and to provide housing services at low rental costs based on expectations of rising prices. Meanwhile, if the market considers that there is not enough room for housing prices, the rental price to Cheonsei can be said to have advanced.

Is this charter system a special system in Korea? Anti-crack medication around the world existed in Mesopotamia in the 15th century BC. The early charter can be traced through the civilizations of Mesopotamia, Greece and Rome in France and Spain, which came under Civil Law in the early Middle Ages. In modern times, it appeared in the Napoleonic Code in 1804 and was implemented in southern France. The charter system is also determined by civil law in Latin American countries, including Louisiana, Argentina and Bolivia. In most of these countries, the charter does not exist, but it is not the only lease left in Korea. In Bolivia, in other parts of the world, a worldwide drug called Anticretico is being made. Anticretico is a Spanish word for Anticresis. Anti means Greek to "oppose" and Cresis means "used." Anticretico Bolivia is very similar to the Korean charter, with around 5% of all households living in rental homes under an Anticretico contract. The contract usually lasts two years, pays the owner the rent at the time of moving, and leaves the house at the end of the contract to receive the same amount.

The owner can be a multi-homed person, but we can also rent a house and live on rent or rent. Somewhat different from our predecessors were also found. In Korea, tenants pay rent in return, but the Bolivian Anticretico is sometimes seen by its owners as a kind of loan that borrows money from tenants. If you do not return the lease after the contract expires, ownership may fall to the tenant in extreme cases. In Bolivia, when taking drugs all over the world, lawyers ensure that the court does not have other rights (such as mortgages) that are fixed at home and recorded on a list. In addition, based on the agreement of both parties, the contract can be made so that ownership is automatically linked to the lessee if the deposit is not returned within the due date. Because there are many unregistered leases in Bolivia and this contract is very weak in housing stability, Anticretico is considered a relatively safe lease for tenants.

In the case of Indian charters, there are special cases in very few regions. If you pay a fixed amount of money for two to three years and the contract expires, the owner only pays the principal without interest. If the owner cannot return the security deposit at the end of the contract, the house will be transferred to the renter.

The fact that premortal history is deep enough to return to BC shows that we can view premortal life not as a linear process of birth and extinction, but as a process of cycles of decline and increase. At the same time, however, the decline in the global share of medicines in Korea and Bolivia reminds us that rare wars throughout the world will soon disappear.

How does the charter system affect the base rate of 1%?

Many domestic experts view our decline in rents and increases in rents as trends in the global housing market, and it seems that the loss of charters is a natural phenomenon that cannot be avoided when expectations of price increases disappear. Why I regret seeing whether rent increases due to the progress of polarization rather than the progress of residence. If the charter decreases (and of course, there are ups and downs), it may not be a natural phenomenon with the development of the housing market. We see that tenants who cannot increase rent due to income stagnation must enter the rental market (including anti-tax). It would be more correct to say that most cheonsei rents are unnatural, but cannot be avoided.

The Bank of Korea's interest rate cut will soon break the band 1.25%, which is the lowest in history, and fall below 1%. In the face of heavy household debt, falling interest rates continue to be a burden on debt management. Interest rate cuts affect the economy as a whole through various channels, including the interest rate channel, asset price channel, credit channel, exchange rate channel, and expected path. Government measures to cut interest rates have triggered the decision to stimulate the domestic economy by expanding corporate investment and increasing household consumption through various interest rate ripple pathways, and to regain economic vitality both internally and externally by export companies in order to compete in the international market.

But a decrease in interest rates has a negative effect besides the positive ripple effect. Interest rates are good news for households who get loans and pay back their principals or those who plan to get loans. In addition, interest rates are good news for builders with new housing plans. But lowering interest rates is not the only good news for families who continue to struggle. This is due to the fact that rent to rent is getting faster and the increase in rental prices is inevitable. The charter system is a rental system where landlords and tenants can be fulfilled at the same time when housing prices rise and interest rates rise. Conversely, if a low interest rate is expected and a low interest rate is higher, the owner will try to change the rented house into a rented house faster because tenants are better than tenants. As a result, there may be a continual increase in rental prices due to supply-demand mismatches between tenants seeking rent and landlords who rent.

In Seoul, house prices continue to rise. In this situation, I wonder what will happen if the basic tariff gets lower. As long as house prices rise, there is still a need to buy a charter house. Consider the causal relationship between the base rate and rental rates when house prices cannot rise. Although a decrease in interest rates does not have a significant effect on viaparts such as singles or coalitions, it can have a significant impact on apartment rental prices. Rental prices usually follow 9-10 months. This may be caused by the lag time which affects short-term and long-term interest rates based on the spread of interest rates, and not directly affects the market. Rents are bigger than viaparts, which are growing rapidly, and rental rates are slower.

As a result, cutting interest rates will have a greater burden on rented households living in apartments. In this situation, what are the alternatives for tenants to choose their next place to live? It is possible to buy a house, change rent, and save a charter. The market will continue to choose to cut basic rates, which can cause increased jitters in the trading and charter markets. The spread of anxiety in the charter market is no big deal for expensive tenants who can afford to buy a home. On the contrary, it is more threatening to the middle class and low income, who do not have the capacity to buy a house and even the conversion of monthly rent leads to higher housing costs. Increased rent around spare parts and cheap apartments can further broaden the housing gap. Therefore, the government must consider a detailed management strategy of & # 39; increasing household debt & # 39; and 'spreading housing instability due to rising rental prices' under the shadow of a reduction in basic rates.

Korea has the majority of real estate in household wealth

The share of real estate in household wealth in Korea is large and comparable to other countries. The reason is largely due to the charter system in high interest rates. The continued decline in interest rates has reduced the use of the charter system, while the recent rise in house prices has extended the viability of the charter system.

Let's look at the impact of low and negative prices on real estate throughout the world. If you borrow money at a negative rate, you are actually paying less than you are borrowing. Apple issues European bonds with a negative interest rate, which means that Apple will later be paid to borrow. What happens if interest rates are negative in the US? Of course, it is unlikely that negative rates will soon emerge in the United States. The Federal Funds Rate (FFR) is still above 2% and the 10-year Treasury yield is around 1.5%.

45% of non-US bonds now have negative interest rates, all of which are worth around $ 15 trillion. Some say that the Federal Reserve is under pressure to cut interest rates, so if you cut interest rates several times before the recession occurs, negative interest rates can help boost the economy. I don't know How do interest rates negatively affect mortgages and investors? Negative interest rates can erode confidence in the US economy, which can cause a decline in the stock market. Some sectors will be devastated. Banks expect yields to fall because they depend on interest income.

On the other hand, if negative interest rates spread to the United States, real estate might be one of the few beneficiaries. For real estate investors, negative interest rates act as the principle of making loans cheaper. Even if the Treasury yield is negative, there is a small chance that the mortgage rate will turn negative. But assuming that mortgage rates move with long-term debt instruments, there can be a significant reduction. In November 2019, the April average (Annual Percentage Rate) of 30-year fixed-rate mortgage loans was around 3%, and the 30-year Treasury bond yield remained at 2%. If the 30-year Treasury yield is unprecedented to 1% or even 0.5%, it means that the 30-year mortgage rate can easily fall to the range of 2% to 2.5%. If you borrow $ 200,000 to invest in real estate. Lower interest rates will reduce your monthly debt costs and make your real estate cash flow better than before. If real estate REIT issues bonds with a yield of 3% and money can be used to buy property with an yield of 8%, the result is 5%. Furthermore, if you can issue bonds with a yield of 0% or 1%, the margin can be much better.

Let's say interest rates will decrease. For long-term loans for 10 years, floating interest rates will be better than fixed rates. (If no one knows how affordable it is, but it is affordable), maybe it's better to buy my house. Using aging rates from countries where the yield on 10-year Treasury bonds has reached 0% and the estimated population of Korea, Korea also expects 10-year Treasury bond yields to reach 0% in a few years. There may be situations where negative growth is not unusual at the zero interest rate, but it is a leap forward to say that the economy is in negative territory, leading to the same financial crisis as in the past. Under these circumstances, zero interest rates can help households increase returns by reducing savings and increasing investment in risk assets such as real estate.

As a result, we can make several assumptions. Low prices and low growth tend to be the basic conditions of the housing market. It's hard to run to a house with ugly pockets. So investing in a popular place supported by demand can result in higher returns, which can drive money here. The real estate market is expected to be different. The main areas or issues of development are those areas where profitability is well realized, so investment will be limited to these areas. When the bank deposit interest rate is close to zero, the real estate market will reshape around rent and rent, and the charter will continue to shrink. The trend will increase if lower interest rates are accelerated and property prices are stable in the long run. In times of negative interest, people who don't have a home tend to dislike the charter. In many cases, the difficulty of the premortal existence will increase.

※ I am an expert in international economics and currently am the Director of the Ministry of Strategy and Finance (sent by the National Diplomatic Academy). He has served as tax head of the OECD Policy Center in Korea, Director of Foreign Economic Cooperation, and International Financial Reviewers. With a book [한 권으로 읽는 디지털 혁명 4.0] [식탁 위의 경제학자들] [명작의 경제] [법정에 선경제학자들] [나를 사랑하는 시간들] Etc


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