Seoul Apartment Prices Expected to Remain High Despite Supply increases
SEOUL – Despite efforts to expand housing supply,Seoul apartment prices are likely to remain elevated in the short term,driven more substantially by financial factors like interest rates and tax policies than by increased construction,according to real estate experts. The assessment comes amid ongoing debate over the new administration’s approach to the housing market.
The persistence of high prices impacts prospective homebuyers, current homeowners, and the broader economy, potentially delaying household formation and exacerbating wealth inequality. while increased supply is expected to offer medium-to-long term stabilization, the immediate market response will be dictated by financial conditions and the structure of real estate taxation, experts say. The situation calls for urgent review of current tax benefits favoring single-homeowners, which are seen as contributing to market distortions.
Woori Bank’s Real Estate Research Team head, Ham Young-jin, noted the limitations of supply-side solutions in the face of strong demand.”The expansion of housing supply can be expected to stabilize in the medium and long term, but there is a limit to the suppression of demand in the short term,” he stated.
Experts emphasize that interest rate fluctuations and tax policies wield a more immediate and powerful influence on the Seoul real estate market. Changes in interest rates directly affect borrowing costs and buyer sentiment, while tax structures can concentrate demand for high-priced properties.
Konkuk University Adjunct Professor Choi Hwang-soo highlighted the past impact of financial indices on housing prices. ”In domestic research, housing prices have been the most influenced by the financial index and interest rate fluctuations,” he said.”Policies such as loan restrictions and supply expansion can be effective in the short term, but thay do not have a long-term and powerful impact as interest rates.”
Current tax benefits for single-homeowners – including exemptions from transfer taxes, special taxes, and property taxes for homes valued under 1.2 billion won – are identified as a key driver of market imbalance.Konkuk University Real Estate Professor Choi Tae-gyu argued, “currently, one households are enjoying benefits such as transfer tax tax exemption (less than 1.2 billion won) and exemption from special taxes and property taxes.” He added that the system creates “a market distortion” and requires “urgent” reform.