"Rising to Nodo-gang"... Toheje Sparks Seoul's Bull Market [Unusual Housing Prices]

Signs of Housing Price Increase Spreading to Seoul Outskirts
Presidential Election and Interest Rate Cuts Lead to Long-Term Upward Trend
Short-Term Rapid Rise May See Temporary Adjustment
Effectiveness of Reinstating Permit System in Question

After the lifting of the land transaction permit zone, apartment prices in the three Gangnam districts recorded the largest increase in seven years. Surrounding areas such as Mayongseong (Mapo, Yongsan, Seongdong) also saw significant fluctuations in apartment price change rates. The Seoul Metropolitan Government acknowledged the rising trend in housing prices on the 16th, a month after the lifting of the permit system, reporting that prices in Jamsil-dong, Songpa-gu, and Samsung, Daechi, Cheongdam-dong in Gangnam-gu rose by an average of 3.7%. Experts believe that the lifting of the permit system and the city's response triggered a surge in buying sentiment, and variables such as the early presidential election and interest rate cuts could act as catalysts, potentially sustaining the upward trend through the second half of this year.

Housing Price Increase Triggered by Permit System Lifting... Extending to Seoul Outskirts

According to a survey conducted on June 17 by Asia Economy targeting five real estate experts, all experts observed that the housing price increase that started in the three Gangnam districts this year has now spread to Gangdong, Gwangjin, and Seongdong districts. Kim Je-kyung, director of Toomi Real Estate Consulting, stated, "The price increase trend has extended to Mapo-gu and Seongdong-gu," adding, "Prices are also moving upward in Dongjak-gu and Gwangjin-gu, centered around redevelopment and reconstruction."

Four out of the five experts predicted that it is only a matter of time before the price increase trend spreads to the Nodo-gang area. They foresee that the ripple effect of the housing price increase, which began with the lifting of the permit system, could spread throughout Seoul. The shortage of new apartment supply and interest rate cuts provided the initial impetus for price increases, and the lifting of the permit system sent a strong signal of regulatory easing to the market, stimulating the upward trend.

Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, explained, "This year is when the supply shortage in Seoul is being keenly felt, and expectations for interest rate cuts have also increased," adding, "The lifting of the permit system in this context has caused buyers to start feeling uneasy." He further predicted, "Although it will take time, the Nodo-gang area will see prices rise primarily in new large complexes, followed by older buildings also increasing in price." Ham Young-jin, head of the real estate research lab at Woori Bank, forecasted, "If apartment transaction volumes support about 6,000 cases, the price trend is expected to spread to the Nodo-gang area and the Geumgwan district (Geumcheon, Gwanak, Guro)."

Minimal Effect of Reinstating Permit System... Need for Fundamental Measures to Control Housing Prices

The government and Seoul city have agreed to consider reinstating the permit system if excessive housing price increases continue. However, experts criticized the reinstatement as a superficial measure that only causes side effects in the market. They argued that reimposing regulations cannot suppress rising prices. They unanimously agreed that it is time to seek fundamental measures to control housing prices rather than relying on regulations.

Specialist Yoon Soo-min said, "Premature regulations could cause prices to surge in areas excluded from regulations, such as Gangdong-gu," adding, "It is a time to observe the market as it naturally finds its equilibrium." He continued, "The current problems the market faces are issues that should have been encountered at some point if regulations were lifted," emphasizing, "It is more important to send a message to increase supply to the market than to impose premature re-regulations."

Chief Yang Ji-young pointed out, "While regulations temporarily affect the market, it cannot be guaranteed that the effects will last long-term." She added, "The fundamental cause of the widening price gap between the three Gangnam districts and the outskirts is infrastructure issues," stating, "Expanding infrastructure in Seoul's outskirts to disperse investment demand concentrated in prime locations is the fundamental solution."

‘Presidential Election and Interest Rate Cuts’ Lead to Long-Term Upward Trend... Short-Term Rapid Rise Pauses

Experts predict that if the effects of lifting the permit system continue without significant regulations, the housing price increase trend will persist through the second half of this year. There is a growing consensus that the market will experience an upward trend while observing the permit system, housing price increases, and government and city responses. This marks a shift from earlier in the year when uncertainty due to the real estate market downturn and political instability made it difficult to predict the direction.

They cited the early presidential election as the biggest positive factor. It is expected that both ruling and opposition parties, mindful of public opinion, will find it difficult to impose strict real estate market regulations. Kim Je-kyung said, "If an early presidential election is held, both parties will likely propose development policies rather than regulations to appeal to public sentiment," predicting, "This expectation could be reflected in the market, causing price increases." An anonymous real estate expert also said, "With the increasing possibility of an early presidential election, it will be difficult to strongly enforce loan regulations," adding, "Combined with interest rate cuts and supply shortages, this upward trend is expected to continue through next year."

The biggest variable will be whether the third stage of the stress DSR (Debt Service Ratio) will be implemented in July. Song Seung-hyun, CEO of Urban and Economy, predicted, "Since a short-term rapid rise has continued after the lifting of the permit system, if the third stage of stress DSR is implemented in July, it will be difficult to maintain the current upward trend." Chief Yang Ji-young also forecasted, "If the third stage of stress DSR is implemented, the upward trend may temporarily pause."