The government has assessed that the rise in apartment prices in Seoul is slowing, with improvements in housing permits and construction starts signaling market stabilization. While short-term supply concerns may persist due to a decrease in move-in volumes, the housing market is expected to stabilize significantly starting in 2028 with the full-scale occupancy of the third new towns.
On October 18, the Ministry of Land, Infrastructure and Transport explained the trends in the housing market and future outlook, noting that the effects of policies aimed at expanding housing supply and regulating loans are beginning to show in some indicators.
The ministry emphasized that leading indicators for housing supply are improving. From March to August of this year, housing permits in Seoul totaled 36,000 units, a 74% increase compared to 21,000 units during the same period last year. Similarly, construction starts rose to 17,000 units, up 45% from 12,000 units year-on-year. However, this figure still falls short of the recent 10-year average of 31,000 units.
The increase in housing prices is also showing signs of moderation. According to the Korea Real Estate Agency, apartment sale prices in Gangnam fell by 1.65%, in Seocho by 1.25%, and in Songpa by 0.45% in September. Notably, Gangnam and Seocho have experienced price declines for 10 consecutive weeks.
Transaction volumes and buyer sentiment are also weak. The government reported that the number of apartment sales in Seoul dropped from 8,900 in May to 4,600 in August. In contrast, the number of listings increased to approximately 74,000, a 30% rise from 57,000 at the beginning of the year. The consumer sentiment index for the Seoul housing market, as reported by the Korea Research Institute for Human Settlements, also decreased from 139.9 in July to 130.8 in September.
The government explained that measures such as designating land transaction permission zones have suppressed speculative demand. The proportion of gap investment transactions in Seoul apartments decreased from 37.9% in October last year to 6.1% in August this year.
However, the government believes that short-term price pressures remain due to a lack of housing supply. The number of move-ins for apartments in the metropolitan area is projected to decline from 130,000 units last year to 105,000 units this year, significantly below the recent 10-year average of 180,000 units.
Conversely, rising interest rates are cited as a factor constraining housing prices. The base rate increased from 2.5% in June to 3.0% in August, and mortgage rates are nearing levels seen during the housing price decline in 2022.
The Ministry of Land, Infrastructure and Transport anticipates that the effects of expanded supply will become visible in the medium to long term. The number of move-ins for the third new towns is expected to rise from 1,300 units this year to over 10,000 units by 2028, improving housing supply conditions in the metropolitan area. The slowdown in household growth in Seoul and the relocation of public institutions are also expected to help distribute housing demand in the metropolitan area.
A ministry official stated, "We will closely monitor the progress of major projects to ensure that planned supply translates into actual construction and occupancy. We will swiftly address factors hindering projects, such as delays in permits, construction cost disputes, and financing issues, while also implementing measures to alleviate the burden of rising housing costs on low-income households."
* This article has been translated by AI.
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