In addition to Moon Jae-in government’s policy actions so far to curb housing prices, the escalating fallout of COVID-19 may daunt South Korea’s overheated real estate market, observers noted Monday.

The key question is whether the impact of the pandemic will escalate to a global financial crisis.

Last week, the Bank of Korea pointed out that COVID-19 has been exerting a more direct and drastic impact on the stock market, compared to past major epidemics.

Throughout the outbreaks of severe acute respiratory syndrome (2003), novel influenza (2009) and Middle East respiratory syndrome (2015), the domestic stock market marked a 5.6 percent fall on average.

In contrast, the benchmark Kospi logged a 13.6 percent fall as of March 5 starting Jan. 21, when the first impact of the new coronavirus was reported, data showed.

Last Friday, taking impact from the World Health Organization’s proclamation of COVID-19 as a pandemic, Asia’s fourth-largest saw its two main bourses -- Kospi and Kosdaq -- halt temporarily in an emergency market stabilizing action.

“The problem now is that unlike in past cases of SARS or MERS, (COVID-19) has triggered concerns that it may escalate into a global financial crisis,” said Ahn Myung-sook, senior manager at Woori Bank’s real estate consulting center.

“The domestic economy has already displayed signs of contraction. Under pessimistic scenarios, the housing market may remain dampened for as long as it did during past financial crises.”

Park Won-gap, chief real estate analyst at Kookmin Bank, also suggested that the country’s housing prices may tumble, depending on the developments of the coronavirus.

Backing up such skeptic views within the market, Hyundai Research Institute suggested in its recent report that the construction industry here is likely to prolong its negative growth this year, leading to additional job losses in the sector.

Also, in case the epidemic continues to spread in the popular metropolitan zone, the volume of real estate transactions is likely to falter as people shun face-to-face meetings, the institute claimed.

The incoming price-ceiling system may also undergo setbacks. As the central and local governments are increasingly banning offline gatherings, residents of outdated apartment complexes that are subject to reconstruction are demanding that the new regulation should be put off.

Upon announcing a price ceiling on newly built private homes, the government also came up with a grace period for redevelopment and reconstruction complexes that have already obtained the related approvals.

In order to qualify for the rule exclusion, these complexes have to make the public sale notices by April 28 but are finding it hard to make related resident discussions amid the spread of the new coronavirus.

Among Seoul’s districts, Gangdong-gu has recently filed a petition to call for a delay in the price ceiling regulation timeline. The district is currently expecting to kick off reconstruction of a massive apartment complex which embraces 4,786 housing units.

Other associations such as the Construction Association of Korea have also made similar petitions to the Land Ministry, demanding that the price-ceiling rule be put off by three months or more.

Despite the downside factors, however, the general consumer sentiment in the housing market remained on a moderate uptrend, almost to offset the impact of the government’s price-curbing actions.

The consumer sentiment index for realty closings came to 127.6 points in February, up 4.6 points from a month earlier and extending the uptrend for 10 months straight, according to the state-run Korea Research Institute for Human Settlements.

A reading between 95 and 114 indicates a relatively steady market, while a reading of 115 or higher represents an overheated market.

The latest index was more or less the average figure observed shortly before the administration unveiled its landmark real estate regulations -- dubbed the Dec. 16 measures.

In the Seoul-Gyeonggi Province area, the corresponding figure stood at 135.7 points, up 7.4 points on-month.

“These figures mostly reflect the market sentiment change in the January-February period, and it is possible that they do not fully include the Feb. 20 measures and the COVID-19 fallout,” the institute said.

As the impact of the new coronavirus here peaked in late February, officials called for a wait-and-see approach toward the forthcoming March indexes.

By Bae Hyun-jung (tellme@heraldcorp.com)