SEJONG -- Negative growth in the nation’s home prices expanded during the third quarter, compared to the previous quarter, in the wake of rapid rate hikes, the Korea Development Institute said Thursday.

The state-run think tank, in its recent report, predicted the decline in home prices will continue through the first half of next year. But it raised a possibility of a different phase starting from the second half of 2023.

It said the average trading price of homes in the Greater Seoul area -- which includes Seoul, Gyeonggi Province and Incheon -- fell by 1.19 percent in the third quarter of the year. This marked a sharper decline compared to a 0.05 percent fall in the second quarter.

Contraction in the other six major cities and eight provinces, which includes Sejong, Busan and Jeju Island, heightened over the corresponding period -- from minus 0.17 percent to minus 0.54 percent.

“Home prices will likely be in the downward trend until the first half of 2023,” the KDI said. “Currently, both home sellers and buyers are taking a wait-and-see position amid high uncertainty.”

Saying that the housing market is slower than the financial market in terms of reaction velocity to rising interest rates, it forecast that recent hikes in benchmark rates will continue to be reflected into the property market on a gradual basis in the coming months.

After the continuous drop, there is a possibility that the housing market will face high volatility starting from the second half of 2023, the institute said.

When there is a change in monetary policies according to a change in consumer prices growth and the extent of economic growth, home prices will face a different phase, like a stop in falling or a rebound, about a year later, it predicted.

Compared to 0.5 percent per annum in July 2021, the benchmark interest rate has been set at 3 percent since earlier this month after a series of hikes by the Bank of Korea.

By Kim Yon-se (kys@heraldcorp.com)