OWL Magazine Korea

Sun Dae In “Talks Crazy Real Estate”

Sun Dae-in is known as a leading real estate bull. In 2013, when his book “Crazy Real Estate” was published, he used all kinds of different data to predict that real estate would crash, but in the end, real estate prices continued to rise.

The upward trend in real estate continued until 2022, after the pandemic, but recently, the U.S. Federal Reserve maintained high interest rates from 2023, which dampened investment sentiment and caused Korea’s real estate to enter a downturn.

In the end, “real estate” prices did eventually fall, but it was a bit of a cool prediction that came true more than a decade after the book was published.

“Sun Dae in: Crazy Real Estate.”

Sun Dae-in’s “Crazy Real Estate” is a book that warns that the real estate bubble is about to burst in South Korea, which at the time was dubbed the “Real Estate Republic,” and that investors should be prepared for a potential crash.

In fact, until the recent interest rate hike by the U.S. Federal Reserve, Korea’s economy began to stagnate and real estate began to decline, Korea’s real estate prices were constantly rising, to the point where there is a saying that Korea is a “real estate god”.

This is a natural consequence of Korea’s economic growth. From 2000 to 2010, Korea’s economy grew steadily. The average age of the population was more than a decade younger than it is today, and the country had a youthful vigor and dynamism. Its neighbor, China, was also experiencing tremendous growth. Korea’s tremendous growth during this period was fueled by trade with China, which allowed the country to move from being a middle-income country to eventually becoming a developed country.

During this period, “real estate” prices have been steadily rising. Since the increase in real estate prices was much higher than the increase in wages, many people became frustrated because they could not buy a house by working.

“High interest rates, shrinking labor force, aging population, and high oil prices”

The current situation in 2024 is the exact opposite of the past. The economy is in an even tougher spot after the pandemic. Inflation is rising rapidly and interest rates remain high. In the case of the United States, the economy is doing relatively well even with high interest rates, but in Korea, due to our manufacturing-oriented environment and aging population, we are not able to keep up with the interest rates in the United States. As the domestic economy cannot keep up, Korea is entering a recession.

Add to that a declining global labor force, and you have a situation where cheap, quality goods and services are no longer available. The recent wars in Russia, Ukraine, and the Middle East have added fuel to the fire. As a result, “real estate” prices are falling.

“Real Estate Predictions for 2013 from the Sun Dae-In Institute”

Going back to the book, it explains why real estate prices have been rising in South Korea. The government’s policy to support housing prices led to loans for real estate, which in turn led to a bubble in real estate prices.

To support this thesis, the book presents various statistics. Based on these statistics, it is analyzed that since the price of real estate has been steadily increasing, some people bought houses to take advantage of the market, and many people bought after the fact because they were worried that if they did not buy a house now, they would not be able to buy a house at all in the future.

In this situation, the government also made a significant effort to support “house prices,” he says. Compared to now, the economy is better than it was then, but even then, people thought the economy was not good. From the government’s point of view, if the economy was in a bad state and house prices fell, it would make the economy even worse, so they tried to support house prices by providing loans.

“Park Geun-hye’s real estate measures”

The Park Geun-hye government responded to these concerns with real estate measures. This book directly discusses the government’s real estate policies. The author takes the position that the real estate policies of the Park Geun-hye government are all just a Band-Aid. In the end, the government’s policies are more about enriching those with money.

“Scenario-by-Scenario Prediction of Domestic Real Estate”

The book also predicts the future of domestic real estate. Based on statistical data, the book interprets the data and predicts the future trend of real estate. The book explains what could happen in the Korean real estate market in the future by predicting scenarios and explaining the possible situations one by one.

In fact, the book is based on the fact that the “labor force” will peak around 2015, and the number of working people will decrease after that. Based on this, he cautiously predicts that real estate prices could start to decline as the bubble burst around 2015.

“The unexpected rise of single-person households”

But here’s the catch. The sudden rise of “single-person households” has been unexpected. As the number of single-person households became much larger than expected, there was still a shortage of real estate in the metropolitan areas. This led to a steady increase in real estate prices.

In 2019, with the outbreak of COVID-19, the “benchmark interest rate” was cut to zero as businesses faced a crisis, which also contributed to the rise in real estate prices. The economy slowed down because there was too much money in the market. Eventually, this money flowed into real estate in Korea, stocks in the U.S., and the then newly emerging virtual assets. This process eventually fueled the rise in real estate prices that continued until the country entered the post-coronavirus era.

“What will real estate look like in 2024 and beyond?”

So, where does Korea stand now in 2024? The COVID-19 pandemic has taught us something. At the end of the day, when it comes to real estate, stocks, and other assets, we are in the midst of a big trend.

After all, the US interest rate, which has a huge impact on the global economy, is bound to affect Korea. After all, depending on when the US decides to cut interest rates, Korean real estate will also be affected.

In addition, the ongoing decline in labor and the entry of an aging society is also a factor. The era of an unlimited supply of cheap labor is over. A shrinking labor force leads to rising inflation, and rising inflation puts pressure on central banks to cut interest rates. Rising inflation is the reason why the US Federal Reserve has been unable to cut interest rates.

Therefore, while it is difficult to make rash predictions, it is possible that real estate in the so-called “yolk” areas will eventually appreciate over time as the value of the currency declines, while prices in other areas will remain stable or even decline.

“Crazy Real Estate : What’s still unknown, what can no longer be avoided”