If Apartment Prices Rise 8.2% Annually for 5 Years... Over 90% of Multiple-Home Owners Say "Better Not to Sell" [Financial Stability Status]

Review of Bank of Korea's Financial Stability (September 2026)

"Effectiveness of Real Estate Policies Hinges on Managing Housing Price Expectations"

If apartment prices rise by 8.2% annually for 5 years (Seoul average from last year to present)

Only 8.9% of multiple-home-owning households motivated to sell... 91.1% say "better not to sell"

If the average annual increase in apartment prices over the next five years maintains the 8.2% rate currently seen in Seoul since last year, a Bank of Korea analysis has found that 91.1% of households owning multiple homes would benefit from not selling their properties. In contrast, if the price growth stabilizes at the national average rate of 1.1%, more than 30% of multi-home-owning households would be better off selling. Ultimately, analysts say that in order for the recent series of government real estate measures to be effective, anchoring expectations for housing price increases is crucial.

If apartment prices see an average annual increase of 8.2% for 5 years... 91.1% of multiple-home owners say "better not to sell"

The Bank of Korea made this announcement on the 22nd after holding a Financial Stability Board meeting to review the latest financial stability conditions.

Last month, the government announced several real estate policies: the "2026 Tax Reform Plan" (Ministry of Economy and Finance); "Comprehensive Financial Measures for Real Estate Market Stability" (Financial Services Commission); and "Measures for Rapid Housing Supply to Stabilize Monthly Rent and Transactions" (Ministry of Land, Infrastructure, and Transport), based on discussions at a recent national real estate forum. According to the Bank of Korea, "If these measures lead to an accelerated housing supply, it could help ease supply-demand imbalances and reduce upward price pressures." However, they also emphasized that "given the significant amount of time required for new homes to be supplied to the market, the actual impact of these measures will largely depend on expectations about future housing prices."

The analysis particularly highlighted that for multi-homeowners, expectations of housing price increases have a significant impact on the motivation to sell. If apartment price growth over the next five years is limited to 1.1% per year—the national average since last year—the Bank of Korea estimates that the proportion of multiple-home-owning households motivated to sell, during the period of temporary capital gains tax relief in 2027, will reach 30.4%.

Even if the average annual growth rate stabilizes at 3.5%—the recent average for apartments in the Seoul metropolitan region—19.8% of multiple-home-owning households would be motivated to sell. Conversely, if the expected average annual growth rate soars to 8.2%, matching Seoul's apartment price increases, the proportion of households motivated to sell drops to 8.9%. The remaining 91.1% would benefit more from holding onto their properties.

This is based on a Bank of Korea comparison of household net assets in 2030 in two scenarios: (1) selling a property in 2027 to take advantage of temporary capital gains tax relief, then investing the proceeds at the five-year government bond yield; (2) continuing to hold the property, absorbing the higher property tax burden, but also earning rental income (with a rental yield of 3% calculated by multiplying the interest-to-deposit rent conversion rate by the rent-to-value ratio, applying the average for the Seoul metropolitan area after 2025) and capital gains from price appreciation (unrealized). Households for whom scenario (1) resulted in a higher net asset value than scenario (2) were classified as "motivated to sell."

Apartment complexes line the Bundang district in Seongnam City, Gyeonggi Province. Photo by Yonhap News Agency

Total lending target raised from 1.5% to 3.0%... Caution on renewed household debt growth

With this new policy package, revisions to property and capital gains tax structures, and differentiated increases in tax burdens based on published property values, the real estate market's reaction has varied according to price bands.

While apartment prices in the Seoul metropolitan area remain on an upward trend, sales listings for high-end homes—more affected by stricter taxation—have increased, with price rises decelerating or even reversing. As of September 14, apartment prices in Gangnam District had fallen by 1.28% and in Seocho District by 0.94% compared to July 27, prior to the policy announcement. In contrast, districts with relatively lower prices saw continued buying demand and notable price increases: Jungnang District up 3.46%, Seongbuk District up 3.36%, Seodaemun District up 3.15%, and Gangbuk District up 2.92% during the same period.

Deputy Governor Jang Jeongsu of the Bank of Korea stated, "Mid- and low-priced homes in Seoul’s outskirts and certain areas of Gyeonggi Province continue to show strong price growth, and expectations for further increases remain high. Given this, the upward adjustment of the household lending growth target from 1.5% to 3.0% could further accelerate the rise in home-related household loans." He continued, "Policy authorities should prioritize managing housing price expectations to stabilize the Seoul metropolitan market, maintain a strong stance on macroprudential policies, and closely monitor housing prices and household debt flows for a timely response."

Financial Vulnerability Index at 46.5, reaches long-term average... "Household debt ratio expected to fall to high 70% range by year-end"

Meanwhile, while the domestic financial system remains generally stable thanks to the robust resilience of financial institutions and external payment capacity, analysts warned that risks persist, such as the possibility of increased fragility among vulnerable sectors and heightened monetary and foreign exchange market volatility. Rising pressure for household loan growth has also amplified concerns about the build-up of financial imbalances.

The Bank of Korea noted that, aided by strong semiconductor industry performance, the Korean economy continues to post solid growth, but the extent of income gains varies across sectors. As a result, the ability of vulnerable sectors to service debt could weaken amid rising interest rates.

Deputy Governor Jang commented, "Should we see significant increases in volatility in domestic and global financial and foreign exchange markets due to monetary policy changes by the U.S. Federal Reserve, shifts in long-term interest rates in major economies, or evolving geopolitical risks in the Middle East, Korean financial institutions may face tougher funding conditions. Extra vigilance regarding liquidity risk will be necessary."

The Financial Stability Index (FSI), which measures the near-term level of financial instability, stood at 19.3 in July 2026 and 19.5 in August 2026, rising slightly but remaining within the "caution" range (12–24). The Financial Vulnerability Index (FVI), which tracks the medium- to long-term accumulation of imbalances, reached 46.5 at the end of the second quarter of the year, rising for the ninth consecutive quarter to reach its long-term average. This reflects increases in household credit and housing prices.

Deputy Governor Jang added, "Although the upward momentum appears to have continued into the third quarter so far, factors such as consecutive policy rate hikes in July and August, government real estate measures, and deleveraging from equity market corrections are likely to limit any further increase in the index."

In the credit market, while household credit growth picked up, corporate credit showed only moderate growth. In the second quarter of this year, both home-related and other household loans expanded more than in the previous quarter, due to rising home prices and equity markets.

However, due to significant nominal gross domestic product (GDP) growth, the household debt-to-GDP ratio declined to 85.3% at the end of the first quarter of this year, down from 88.1% at the end of last year. Deputy Governor Jang expects the year-end ratio to fall to the high-70% range, but stressed, "As the decline in household and private sector credit leverage is mainly due to rapid economic growth driven by surging semiconductor exports, it remains important to sustain deleveraging efforts and to prepare for possible changes in domestic and external economic conditions—including a potential reduction in artificial intelligence (AI)-related investment going forward."

This content was produced with the assistance of AI translation services.