[Exclusive] Seoul Apartment Price Growth This Year Tops Last Year's, Hitting a Record Since Statistics Began

Cumulative rise in Seoul apartment prices reaches 8.73%

Highest since weekly statistics began in 2012

“Survival buying” surges for mid- to lower-priced homes in Seoul’s outskirts

Wealth gap widens based on homeownership status

The cumulative increase in Seoul apartment prices through October this year has already surpassed the annual increase recorded last year. Last year’s rise in Seoul apartment prices set a record since the Korea Real Estate Board began compiling its weekly statistics. Unless prices reverse course and fall, they are expected to post the largest annual increase for a second consecutive year. With the number of new homes coming onto the market in Seoul expected to decline for the time being, and new housing supply through public land projects unlikely to materialize quickly, observers say urgent short-term measures are needed to curb rising home prices.

According to the Korea Real Estate Board on October 31, the cumulative increase in Seoul apartment sale prices, based on weekly figures, stood at 8.73% through the fourth week of this month (as of October 26). The previous record was 8.71%, set last year, surpassing the 6.73% recorded in 2018, during the Moon Jae-in administration, for the first time in seven years. With nine weekly readings remaining before the end of this year, the cumulative increase for the year had already exceeded last year’s annual figure by the fourth week of October. It is the highest figure since the Board began compiling weekly statistics in 2012.

Unlike last year, when the three Gangnam districts and the Han River belt drove home price increases, this year the upward trend has been led by outlying areas of Seoul. Looking at cumulative increases through the fourth week of this month (October 26), most of the districts that recorded gains of more than 10% were in the city’s outskirts, including Seongbuk-gu (16.56%), Guro-gu (13.03%), Gangbuk-gu (11.46%) and Nowon-gu (12.71%). The three Gangnam districts and Yongsan-gu, where home prices rose by more than 10% last year, have each recorded cumulative increases of less than 5% this year.

The causes of this year’s home price increases include a shortage of rental listings and stringent lending restrictions. Building permits have plunged over the past three years amid a credit crunch in project financing (PF) and soaring construction costs. Meanwhile, the actual-residence requirement introduced after last year’s October 15 measures prohibited gap investments. As a result, the number of apartments available for jeonse in Seoul, which was still in the 30,000 range in the second half of 2023, had fallen to 21,417 as of October 30. The number of new homes coming onto the market in Seoul also hit a 13-year low. According to Real Estate 114, 17,698 apartments are scheduled for completion in Seoul this year, the lowest figure since 2013, when 16,321 units were completed. If this trend continues, the figure is projected to fall to 5,289 units in 2030.

As a shortage of housing supply has heightened uncertainty in the rental market, more jeonse tenants have been rushing to buy homes in what is known as “survival buying.” Buyers have flocked to mid- to lower-priced apartment complexes in Seoul’s outer districts, where they can get mortgage loans of up to 600 million won. According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system, homes priced below 1.5 billion won accounted for 83.6% (1,789 transactions) of housing sales recorded through October this year. That share was 1.14 times the 73.19% (6,336 transactions) recorded in October last year.

There are also concerns that, as home price increases spread from the city’s outskirts, homeownership will become a factor widening the wealth gap. Until last year, the wealth gap widened depending on the location of one’s home; going forward, it could widen depending on whether someone has been able to buy a home at all. “In the past, the important question was which area you owned a home in. Now, simply owning a home is becoming what matters,” said Yoon Soo-min, a senior real estate specialist at NH NongHyup Bank.

Experts say short-term measures to stabilize the rental market are needed to curb rising home prices in Seoul’s outer districts. Given the considerable time it will take for new housing supply to come onto the market, they say the vicious cycle in which rising jeonse prices stimulate demand for home purchases must be broken. “As rising monthly and jeonse rents are currently supporting the floor for home prices, it may also be worth considering lifting land transaction permit zones as a way to stabilize jeonse prices in the short term,” Yoon said.

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