Seoul Housing Market Surges, Sparking Government Concern

Apartment Prices Climb at Fastest Pace in Nine Months

Seoul’s housing market is experiencing a renewed upswing, with apartment prices rising sharply and prompting warnings from government officials. The increase, fueled by reconstruction expectations and impending loan regulation changes, is spreading beyond the city center.

Rapid Price Increases Across Seoul

The Korea Real Estate Center reported a 0.26% increase in Seoul apartment prices during the second week of June, marking the largest jump since August of last year. This represents a 0.07 percentage point increase from the previous week, and continues a 19-week trend of rising prices. Preferred complexes and those slated for reconstruction are driving much of the growth.

Songpa-gu saw the most significant increase at 0.71%, followed by Gangnam-gu (0.51%), Gangdong-gu (0.50%), and Seocho-gu (0.45%). The rising prices are also extending to areas outside the central districts, including Mapo-gu (0.45%), Yongsan-gu (0.43%), and Seongdong-gu (0.47%), as well as Gwacheon (0.35%) and Bundang (0.39%) in Gyeonggi Province.

One resident, a 40-year-old living in Gangseo-gu, expressed concern about being priced out of the market, stating, “We considered the sale by the five-year-old child entered the elementary school, and I was in a hurry because I had a sign of more than a house price.” Gangseo-gu, which experienced a decline last year, has seen a 0.72% increase in prices this year alone.

Government Response and Market Concerns

The Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport held an emergency meeting to address the situation, led by First Vice Minister Lee Hyung-il. Officials warned of potential measures to stabilize the market and manage demand. According to reports, “The attendees have been aware of the severity of the real estate market in Seoul.”

Seoul Mayor Oh Se-hoon echoed these concerns, describing the situation as “a situation to watch in a very nervous state.” The price increases are occurring ahead of anticipated changes to loan regulations, including the implementation of the third stage of the Debt Service Ratio (DSR) in July. According to a recent report by the Bank of Korea, household debt in South Korea reached 1,738.1 trillion won (approximately $1.3 trillion USD) in the first quarter of 2024, highlighting the sensitivity of the market to interest rate changes and lending restrictions. (Bank of Korea)

Expert Analysis and Future Outlook

Park Won-gap, a chief executive expert at KB Kookmin Bank, suggested that the current surge is driven by a “last train demand” as buyers anticipate the new government’s policies and stricter lending rules. The government has pledged to implement demand management measures to prevent speculation from destabilizing the market, but the effectiveness of these measures remains to be seen.

The rapid increase in housing prices raises concerns about affordability and potential market instability. Continued monitoring and proactive policy adjustments will be crucial to ensure a sustainable and balanced housing market in Seoul.