"Rising" vs "Box Range" vs "Uncertainty"... Seoul Apartment Price Outlook in Confusion [Seoul Housing Prices Where To]②

"Next Year Seoul Apartment Supply Shortage Realized, Price Increase"
"Seoul Apartment Transaction Volume Still Low, Price Expected to Remain Firm"
"Unpredictable Direction of Anxiety Among Non-Homeowners"

[Image source=Yonhap News]

As Seoul's housing prices continue to rise sharply, experts' market forecasts are divided. Opinions differ on how long the price surge, which began in the Gangnam 3 districts (Gangnam, Seocho, Songpa) and 'Mayongseong' (Mapo, Yongsan, Seongdong), will last and whether it will spread to other areas. This contrasts with the government's optimistic stance, which draws a line by stating that "this is not a transition to a trend of sustained increase."

On the 18th, when Asia Economy asked six real estate experts about the future trend of housing prices, some predicted that prices would rise further next year, considering the current transaction volume trend and the shortage of apartment supply. On the other hand, some opinions suggested that prices would remain steady due to the market still recovering compared to past transaction volumes, or that it is difficult to predict the direction of prices amid a market atmosphere dominated by uncertainty.

Prices Will Rise Further Next Year

Yoon Ji-hae, Senior Researcher at Real Estate R114, forecasted, "Housing prices could rise significantly from next year through 2026," adding, "There is a chance that the term 'byeorakgeoji' (sudden impoverishment) might be mentioned once again."

Researcher Yoon explained, "Currently, real demand buyers who postponed purchasing homes due to high interest rates over the past 2-3 years are now buying houses," and added, "In the next 1-2 years, supply performance in the metropolitan area will remain sluggish, resulting in no new move-in units, so competition over who gets the cheaper listings first will continue." She further predicted, "This year, the accumulated inventory acts as a buffer, but once this inventory is absorbed, homeowners will start withdrawing listings and raising asking prices from next year."

She also believed that the application of the stress Debt Service Ratio (DSR), which reduces loan limits, would not dampen apartment buying sentiment. Yoon said, "The implementation of stress DSR phase 2 has been postponed to September, and the final phase 3 will be applied next summer," adding, "Until then, demand is expected to move faster in transactions."

Ko Jong-wan, Director of the Korea Asset Management Research Institute, also predicted, "Supply performance such as permits and groundbreaking is poor, the 3rd New Town projects are sluggish, and construction costs have risen, making reconstruction difficult," adding, "As supply decreases, housing prices will rise further." He also noted, "Compared to early this year, loan interest rates have decreased and newborn special loans have been added," forecasting, "If Seoul housing prices rise significantly, apartment prices in local areas could also increase by next spring."

Prices Will Remain Steady

Ham Young-jin, Head of Real Estate Research Lab at Woori Bank, said, "There are limits to the real estate market becoming a full-fledged bull market amid polarization." He diagnosed, "While real estate prices are rising mainly in Seoul apartments, local areas are experiencing stagnation due to many unsold units," adding, "Seoul housing prices will repeat a pattern of 'going and stopping'."

There is also an argument that it is difficult for a major upward trend to occur because transaction volumes are still low compared to the real estate boom period. Hwang Han-sol, Researcher at Economy Manlab, said, "Although Seoul apartment transactions have exceeded 5,000 cases, they have not reached the past average of 6,000 to 7,000 cases," adding, "In this situation, it is hard to say that housing prices will rise significantly." He analyzed, "The recent increase in transaction volume is partly due to the very low volume for a while," and "As the market recovers, housing prices will continue a slight upward trend."

They forecast that Seoul apartment transaction volumes will not drop significantly and will be maintained between 5,000 and 6,000 cases. Lab Head Ham predicted, "Even if stress DSR regulations are implemented, borrowers can extend repayment terms or take fixed-rate loans to circumvent regulations," adding, "Considering the relaxation of income requirements for newborn special loans, rising jeonse (long-term deposit lease) prices, and the autumn moving season, transaction volumes will continue at the current level." Researcher Hwang also foresaw that "With growing expectations of a U.S. interest rate cut, the effect of loan regulations will be offset," predicting transaction volumes will enter a stable phase.

Uncertainty About Future Direction

There was also a view that it is currently impossible to definitively say where Seoul apartment prices will head. Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "At the beginning of this year, the agenda in the real estate market was 'Who would buy a house with such high interest rates?'" but added, "Now, all urgent sales have been exhausted, and in some parts of Seoul, the market has completely changed to the point where buyers are engaging in 'chasing purchases,' hoping for additional price increases at the point of asset value appreciation."

He diagnosed, "In December 2022, there were 50,000 apartment listings in Seoul, but now there are 80,000. Originally, with more listings, prices should have fallen," adding, "Yet prices are rising due to supply shortages and rising jeonse prices, which have increased buyers' anxiety." Park emphasized, "How much non-homeowners are unsettled is the most important factor determining Seoul apartment prices," adding, "Loan limit regulations or interest rate hikes may have some impact, but the most crucial factor is anxiety, and no one can predict whether prices will rise because of this anxiety."

Jang Jae-hyun, Head of Research at Real Today, also said there is a high possibility that the upward trend could break. He predicted, "The current price rise is influenced by demand rushing ahead due to the postponement of stress DSR implementation to September," adding, "If the purchases by real demand buyers who created this situation stop, Seoul apartment prices could fall like in the second half of last year."