▲ Apartments dotted across the city as viewed from the 63 Building observatory in Yeouido
As apartment sale prices in Seoul approach a record-breaking period of consecutive gains, projections are emerging that the variables sustaining this upward trend are more powerful than before, likely extending the duration of the rally.
According to the Korea Real Estate Board on September 13, weekly apartment sale prices in Seoul maintained an upward trend for 83 consecutive weeks from the first week of February of last year to the first week of September.
The previous record for the longest continuous increase was 85 weeks, spanning from the second week of June 2020 to the third week of January 2022 during the Moon Jae-in administration.
This year's lowest weekly sale price fluctuation rate for Seoul apartments was recorded at 0.05% in the third week of March, affected by the emergence of urgent sales ahead of the expiration of the suspension on heavy capital gains taxes for multiple homeowners.
The increase rate for the first week of September, the most recent survey reference point, stood at 0.20%, continuing a trend of staying in the 0.20% range for a month starting in August.
Influenced by policy uncertainties such as tax revisions that increase the tax burden on high-priced homes and non-resident single-home owners, a downward trend has persisted recently in the "Gangnam 2" districts (Gangnam and Seocho districts), acting as a factor limiting the overall upward momentum.
However, prevailing projections suggest that the Gangnam area's weakness is likely a short-term trend, and the likelihood of the Seoul average temporarily turning downward over the next two weeks is slim.
The economic environment surrounding the real estate market shares both commonalities and differences.
During past periods when Seoul housing prices rose for prolonged periods, low interest rates and abundant liquidity were at play.
To cope with the economic downturn triggered by the COVID-19 pandemic, the Bank of Korea executed a "big cut" in March 2020, lowering the benchmark interest rate by 0.50 percentage points at once from 1.25% to 0.75%.
Subsequently, in May of the same year, it further lowered the benchmark rate by 0.50% to 0.50%, cutting a total of 0.75 percentage points within two months.
From August 2021, the Bank of Korea began raising the benchmark interest rate again, and the upward trend in Seoul apartment prices halted around January 2022, coinciding with the rate returning to the pre-COVID level of 1.25%.
Recently, the Bank of Korea has also raised the benchmark interest rate twice consecutively, pushing it up to 3.00% per annum.
This move also incorporated efforts to respond to the rise in housing prices in the Seoul metropolitan area and the expansion of household debt, alongside stabilizing consumer prices.
However, prevailing analyses indicate that the impact of rate hikes will be limited compared to the past because abundant liquidity—such as large-scale performance bonuses from major corporations driven by the booming semiconductor industry and funds realized from stock profits—is flowing into real estate.
Nam Hyuk-woo, a real estate researcher at Woori Bank, said, "In terms of asset market liquidity, current conditions appear much more favorable than past upward cycles. Even if absolute interest rate levels differ, underlying environmental differences such as the semiconductor boom and gross domestic product (GDP) growth mean the market's purchasing power is at a higher level now than before."
As major measures ranging from lending regulations and expanded designation of regulated areas to tax revisions have already been rolled out over the past year to stabilize housing prices, it remains uncertain whether additional regulations will emerge.
To counter overheating in the Seoul apartment market in June of last year, early in the current administration, mortgage loans were tightened via the June 27 lending regulations. In the second half of the year, through the October 15 measures, all of Seoul and 12 regions in Gyeonggi Province were designated as regulated areas (adjusted target areas and speculative over-heated districts) and land transaction permission zones, while mortgage loan limits were also differentiated by housing price brackets.
Tax revisions increasing the tax burden for holders of ultra-luxury homes and non-resident single homes were also introduced this year, but as public sentiment worsened, a relaxed government proposal emerged, and it may undergo further adjustments during National Assembly deliberations.
A phase where both sale and jeonse (lump-sum housing lease) prices face upward pressure is similar to previous rising cycles.
In 2021–2022, when the impacts of implementing the leasing acts—such as the right to request contract renewal and ceilings on jeonse and monthly rent increases—became apparent, dwindling jeonse listings and soaring jeonse prices led many tenants and homebuyers without homes to turn to purchasing properties.
As a result, demand flocked to mid-to-low-priced areas such as Seoul's outer districts, where the burden of raising funds was relatively lighter, causing prices in these regions to surge significantly. A similar situation has been recurring since the beginning of this year.
With shortages in jeonse listings driven by declining new move-in supply in Seoul expected to remain difficult to resolve for the time being, the trend of rental demand shifting to purchases and driving up lower- and mid-tier housing prices is projected to continue going ahead.
This year's top cumulative price appreciation rates by autonomous district in Seoul are claimed by regions previously classified as mid-tier or lower, including Seongbuk District (13.52%), Guro District (11.06%), Gangseo District (11.01%), Seodaemun District (10.93%), and Gwanak District (10.40%).
Considering these conditions, prevailing projections suggest that the upward trend in Seoul apartment prices will persist longer than in the past.
(Photo: Yonhap News)
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