‘Second Baby Boomers’ Retire… Real Estate Market ‘Big Players’ Make Moves

2024-07-13 23:46:47

Half of all homeowners are in their 50s and 60s… Attention is being paid to whether they will sell their homes to secure funds for retirement

As the second baby boomers (born between 1969 and 1974), numbering up to 9.54 million, approach retirement, attention is focused on what impact they will have on the domestic real estate market. This group, which makes up the largest number in the Korean population structure, is also the age group that has accumulated the most assets when viewed in terms of life cycle. According to the Ministry of Land, Infrastructure and Transport’s ‘2022 Housing Ownership Statistics’, 47.1% of all homeowners are in their 50s and 60s. The market will inevitably be greatly affected by whether these people, who have been the big players in the housing market, buy or sell houses after retirement.

An apartment complex in Gangnam, Seoul. [뉴시스]

What is the real estate trend of the 9.54 million second baby boomers?

There are differing opinions on the housing transaction patterns of the second baby boomers in the future. Some predict that they will sell their homes in large numbers to secure funds for retirement, children’s marriages, and housing purchases. The prices of homes owned by the second baby boomers have already risen significantly, and they are receiving benefits such as a reduction in the capital gains tax on one home per household and a long-term special deduction for holding. Therefore, it is expected that people in this generation will sell their homes upon retirement and enjoy capital gains. If this prediction becomes reality, existing homes will be supplied to the market in large quantities. Naturally, housing prices are likely to stabilize. Accordingly, it is expected that the housing shortage that has recently hit the real estate market will be resolved to some extent.

On the other hand, there is also a view that a significant number of second-generation baby boomers will continue to hold onto their existing homes or even purchase additional homes. It is expected that they will hold onto their homes until the end of their lives in order to secure housing stability. From this perspective, it is also possible that retirees may purchase additional rental homes to secure living expenses that cannot be covered by pensions alone. Furthermore, if a significant number of second-generation baby boomers utilize housing pensions, there may not be many homes released into the real estate market during the subscription period of up to 30 years. If this outlook is correct, the actions of second-generation baby boomers could exert upward pressure on housing market prices.

Let’s look at the specific basis for the two conflicting claims about whether the second baby boomers will “retire” from the real estate market or remain “active.” First, the biggest basis for the claim that “the second baby boomers reduce housing demand after retirement” is the precedent of the first baby boomers who retired before them. According to the “Housing Survey” conducted by the Ministry of Land, Transport and Maritime Affairs (now the Ministry of Land, Infrastructure and Transport) in 2010, when the first baby boomers were about to retire, 54.3% of the first baby boomers who responded to the survey said that they “wanted to live in the countryside after retirement.” Only 22.7% responded that they would live in a large city. In fact, if we look at the population movement patterns of baby boomers, they are widely distributed from large metropolitan areas to nearby small and medium-sized cities, suburbs, and rural fishing villages. The experience of Japan, which experienced aging earlier than Korea, also serves as an argument. It is said that since the early 1990s, when Japan entered an aging society, there has been a large-scale adjustment in housing prices for about 20 years. Based on this, there is an argument that housing prices are falling due to a decrease in housing demand caused by the increase in the elderly population.

Promotional materials for signing up for the housing pension placed at the Korea Housing Finance Corporation counter. [뉴스1]

The argument that the second baby boomers will maintain the homes they already own and go on to purchase new homes is largely based on two circumstances: the fact that the number of housing pension subscribers has increased significantly, and the number of homebuyers in their 60s or older is increasing. The number of housing pension subscribers was calculated to be 121,000 as of the end of 2023. In 2023 alone, the number of new subscribers reached 14,885, the highest ever. There are no separate statistics on the subscription period for these people, but it seems unlikely that these homes will enter the sales market for the time being. There are also statistics that the number of homebuyers in their 60s or older is increasing. In May, the proportion of buyers under the age of 40 among nationwide housing transactions decreased by 0.1% compared to the same period last year, remaining flat. On the other hand, the proportion of buyers in their 60s or older increased by 16.5% compared to the same period last year.

There is a lack of clear evidence on both sides.

However, in my opinion, neither argument currently has a clear basis and is vulnerable to counterarguments. The prediction that housing prices will fall due to the exit of the second baby boomers from the housing market does not properly explain the fact that more than 60% of them are still living with their children and therefore have difficulty selling their current homes, and that the Korean housing market is centered on apartments compared to Japan, so transactions are active and there is not much new supply. On the other hand, the prediction that the second baby boomers will remain key participants in the housing market also has limitations. Since housing pensions are a type of loan product that can be cancelled, they are greatly affected by the real estate market situation, and the recent increase in the proportion of homebuyers in their 60s or older can be seen as a base effect of the strong housing purchase tax for those under 40 due to the implementation of the special housing deposit loan last year. Therefore, it is necessary to refrain from hastily jumping into the real estate market by taking advantage of the retirement of the second baby boomers for the time being.

*If you search for ‘Magazine Donga’ and ‘Twovengers’ on YouTube and portals respectively and follow them, you can find a variety of investment information, including videos in addition to articles.

〈This article Weekly Donga Published in issue 1448

Kim Seong-hwan, Associate Researcher, Korea Construction Industry Research Institute

• great

  0dog

• I’m so sad

  0dog

• I’m angry

  0dog

• I recommend it

  dog

Hot news right now

2024-07-13 23:46:47