2025 Real Estate and Economic Outlook Seminar
"Transaction Volume Increased This Year but Sustainability Is Challenging"
Supply Shortage Puts Upward Pressure Starting in Second Half
Localized Price Changes and Household Debt Regulation as Variables
Next year, nationwide real estate sale prices are expected to decline by 1.0%. While prices in the Seoul metropolitan area are projected to rise by 1.0%, prices in provincial areas are expected to fall by 2.0%, resulting in an overall decrease in sale prices. Price pressure due to supply shortages is anticipated to emerge from the second half of next year.
Kim Seonghwan, Associate Research Fellow at the Construction Industry Research Institute, is presenting the real estate market outlook for 2025 on the 6th at the Construction Hall in Gangnam-gu, Seoul. (Photo by Geonsanyeon)
On the 6th, the Korea Construction Industry Research Institute (KCIRI) announced this forecast at the ‘2025 Construction and Real Estate Market Outlook Seminar’ held at the Construction Hall in Gangnam-gu, Seoul. KCIRI analyzed that nationwide sale prices will drop by 1.0% annually next year, while jeonse (long-term lease) prices will rise by 1.0%.
Kim Seong-hwan, Associate Research Fellow at KCIRI, stated, "Apart from the average market price trends of increase or decrease, localized rises and falls are expected to continue. Considering factors such as housing construction progress and the number of housing starts three years ago, price pressure caused by supply shortages is likely to appear around the second half of next year," he predicted.
KCIRI: "Sustaining current transaction levels is difficult"
Until September this year, housing replacement transactions centered on actual demanders were active, leading to a significant increase in transaction volume compared to the previous year. However, since September, transaction volume has slowed due to government policies managing total household debt. This trend is expected to continue into next year.
From January to August this year, the actual transaction price of apartments in the Seoul metropolitan area rose by 5.08%, and jeonse transaction prices increased by 3.88%. From January to September, the metropolitan area recorded 177,000 sale transactions, a 34.0% increase compared to the previous year. In provincial areas, apartment prices fell by 0.55% and jeonse prices rose by 0.01% from January to August. The transaction volume in provinces from January to September was 201,000, up 9.1% year-on-year.
Associate Research Fellow Kim analyzed, "Although consumer sentiment has somewhat recovered and prices have fallen compared to the previous peak, the absolute price level remains high. The downward adjustment of mortgage loan interest rates is limited, and government policies on total household debt management are expected to continue. Considering the slow overall economic recovery, it will be difficult to sustain the current level of transactions."
KCIRI expects the preference for newly built apartments to remain strong, but due to rising construction costs making it difficult to set low sale prices, demand concentration is expected to persist mainly in projects subject to the price ceiling system.
This Year’s Housing Completion Volume Peaks... Permits Down 21%
Regarding housing supply, the completion volume exceeded 500,000 units this year, marking a peak. However, housing starts have sharply declined over the past three years, which may affect future supply. Although the leading indicator of permits has decreased, housing starts increased compared to the previous year. From January to September this year, apartment permits are estimated at 190,970 units, down 21.2%, and non-apartment permits at 14,336 units, down 34.4%. During the same period, apartment housing starts rose by 56.4% to 168,729 units, while non-apartment starts fell by 37.0% to 12,727 units.
Kim said, "It usually takes about three years from housing start to completion. Housing starts peaked in 2021, and completions are expected to increase in 2024-25 before declining afterward. The ratio of starts to permits is decreasing, and there are more projects that have received permits but have not started construction. Although completions relative to starts are stable compared to permits, completions are also decreasing."
Next year, housing permits and sale volumes are expected to recover to 2022 levels. Sale volumes are projected at 290,000 units, 30,000 more than this year’s estimate of 260,000 units. Permits are expected to reach 440,000 units, an increase of 75,000 units compared to this year’s estimate of 365,000 units.
Associate Research Fellow Kim added, "After next year, market interest in newly built housing is expected to increase as the shortage of new apartments becomes recognized. Especially, supply-side financial conditions such as project financing (PF) are expected to improve compared to this year, influencing the increase in permits. However, if unexpected policies related to consumer financing, such as group loans, emerge, the growth trend may slow, so careful policy design is necessary."
Jeonse Price Increase Slows Next Year... Jeonse Loan Regulations a Variable
Jeonse prices are expected to rise at a slightly slower pace than this year as the concentration on apartments eases. Although many demanders avoided non-apartment types such as row houses and multi-family houses due to jeonse fraud issues, the supply of public rental housing by public entities like LH is expected to reduce the decline. However, rising interest rates on jeonse loans and ongoing discussions about including jeonse loans in debt service ratio (DSR) calculations are seen as constraints that could exert downward pressure on jeonse prices.
Regarding move-in volumes affecting jeonse prices, the monthly average was 29,000 units from January to September this year but is expected to fall to 21,000 units monthly next year and around 22,500 units in the first half of 2026. Moreover, reliance on jeonse loans is increasing, and rising interest rates on these loans could impact jeonse prices.
Kim analyzed, "The jeonse market is expected to see additional demand inflow into the rental market due to reduced sale demand. Next year’s move-in volume will slightly decrease compared to this year, which is a factor for price increases. Although conversion to monthly rent is progressing, the conversion rate and the lowering of market interest rates following base rate cuts will somewhat slow this trend, especially for apartments."
Construction Orders to Increase 2.2%, Construction Investment to Decline 2.1%
Next year, construction orders are expected to increase by 2.2% compared to the previous year. After two consecutive years of decline last year and this year, annual order volume is projected to reach about 210.4 trillion won, supported by falling interest rates and policies to revitalize housing supply. This year’s construction orders are expected to decrease by 0.4% to 205.8 trillion won. Last year, orders fell 16.8% year-on-year to 206.7 trillion won.
By client type, public orders are expected to decrease by 1.7% to 65.3 trillion won, while private orders are projected to increase by 4.1% to 145.1 trillion won. By construction type, housing orders are expected to rise 4.7% to 73.9 trillion won, non-housing orders to increase 2.6% to 61.1 trillion won, and civil engineering orders to decline 0.3% to 75.5 trillion won.
Researcher Lee Ji-hye from the Construction Economy Research Institute is presenting the construction market outlook for 2025 on the 6th at the Construction Hall in Gangnam-gu, Seoul. (Photo by Construction Economy Research Institute)
KCIRI analyzed that domestic construction investment next year will fall 2.1% year-on-year to 295.3 trillion won. The sharp decline in construction orders last year is expected to continue affecting investment not only in the second half of this year but also next year. Reduced government social overhead capital (SOC) investment, low investment capacity of companies and households, high-interest rates due to government loan regulations, fallout from real estate project financing (PF) defaults, and still high construction costs are cited as obstacles to construction market recovery.
Researcher Lee Ji-hye of KCIRI explained, "Construction companies need to monitor the rapidly changing market environment and establish risk management systems such as portfolio diversification, supply chain diversification, and securing financial liquidity. Additionally, activating technology investment to reduce costs, increase productivity, and enhance industrial competitiveness, as well as strengthening safety and quality management through the introduction of smart construction technologies, are necessary."
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