[Home Tech] For Seoul Apartments, Supply Imbalance Is a Bigger Problem Than Supply Reduction

One-third of Seoul's Supply Concentrated in the Three Gangnam Districts
No New Supply in Jongno, Gwanak, or Geumcheon
A Shift Toward Balanced Regional Distribution Needed

Editor's NoteOver 70% of South Korean citizens' assets are tied up in real estate. A home is our most important asset, as well as the closest and most comforting place to us. As we live with our assets locked in our homes, we provide you with the information needed to buy and sell property. The Asia Business Daily, together with Kim Hyosun, Chief Real Estate Specialist at NH Nonghyup Bank, publishes [Home Tech] every three weeks to provide you with essential knowledge.

The recent housing market is showing unusual signs. In the first half of this year, overheating in some regions prompted the government to introduce a series of financial regulations and supply measures. However, the upward trend is actually spreading in major areas such as Seongdong, Songpa, and Gwangjin in Seoul, as well as Bundang and Gwacheon in Gyeonggi Province. Looking at the weekly rise in the capital region, the increase in ultra-high-priced apartments within regulated areas has somewhat stabilized, but the upward trend is spreading to mid- and high-priced complexes along the Han River and areas south of the Han River in Gyeonggi Province.

Despite the economic downturn, the main reason for the continued overheating in certain parts of the capital region is the shortage of supply in Seoul-especially the decrease in new apartment occupancy, which will begin in earnest next year. The question is whether the so-called "supply cliff" for apartments in Seoul will become a reality starting next year.

Nationwide, the number of new apartment units available for occupancy will decrease after peaking this year. Next year, the nationwide occupancy supply is expected to be 216,000 units, which is only about 60% of the 10-year average of 359,000 units. In Seoul, the impact of sluggish construction starts over the past three years will become more pronounced, and the number of units available for occupancy will decrease starting next year. This year, the number of new apartments available for occupancy in Seoul is 29,000 units, but only about 17,000 of these are for sale, excluding rental units. The actual market supply capacity is likely to be even more limited.

More problematic than the simple decrease in supply is its concentration. Looking at Seoul's occupancy (sales) plans, supply is heavily concentrated in the Gangnam area. From the second half of this year through 2027, Seocho District will have the most with 7,475 units, followed by Dongdaemun District with 5,370 units, and Songpa District with 4,831 units. The combined supply in the three Gangnam districts accounts for about one-third of the total, while outer residential areas such as Jung, Jungnang, and Dobong Districts will have virtually no new occupancy. There will be no sales occupancy supply at all in Jongno, Gwanak, or Geumcheon Districts.

Even now, it is only newly built complexes and a handful of areas with active redevelopment projects-such as Gangnam, Seocho, Songpa, Seongdong, and Mapo-that are raising Seoul's average. From next year, the proportion of new builds in these areas will increase even further. Most districts are entering a period of occupancy gaps, making it highly likely that residential disparities between regions will intensify.

This concentration could actually have side effects on market stability. In the three Gangnam districts, as well as Seongdong and Yongsan, continued new occupancy will improve the residential environment and likely lead to active rental and sales transactions. However, in areas with almost no new occupancy, the proportion of old housing will rise, and the supply of rental units may become insufficient.

The focus of supply policy now needs to shift from simple quantitative expansion to a balanced supply structure across regions. Even if the total occupancy supply in Seoul remains at a certain level, if it is concentrated in specific areas, demand will also be focused there, and instability in the housing market may persist. Even if the government's supply measures speed up the permitting process, it will still take at least three to four years for actual occupancy to occur, so the decrease in occupancy supply is an unavoidable reality. It will be difficult to expect a recovery in supply before 2028.

At the center of housing price stability is the supply of homes in Seoul. The key issue is not the quantity, but where and what kind of homes are supplied. This is why the government's housing policy must move beyond focusing on the three Gangnam districts and other core areas, and instead promote regeneration and redevelopment across all regions.

Kim Hyosun, Chief Real Estate Specialist at NH Nonghyup Bank