[Home Tech] 2026 Real Estate Market to See "Extreme Polarization"... Liquidity Will Flow to Core Areas

Declining Value of the Korean Won Highlights Real Estate's Intrinsic Value
Liquidity Expected to Flow into Prime Locations Less Affected by Lending Regulations
Commercial Real Estate: Intensified Distinction Between Winners and Losers

Editor's NoteOver 70% of the assets held by Korean citizens are tied up in real estate. A home is our most important asset, as well as our closest and most comfortable place. While we live tethered to our homes, we provide you with essential information for buying and selling property. The Asia Business Daily, together with Hyosun Kim, Chief Real Estate Specialist at NH Nonghyup Bank, publishes [Home Tech] every three weeks to equip you with the knowledge you need.

The key word for next year's real estate market is expected to be "extreme polarization." As the global trend of interest rate cuts takes hold and governments around the world implement expansionary fiscal policies, a so-called "policy mix" is expected to come into full effect. However, it will be difficult for this warmth to spread evenly across all regions and assets, so investors will need to be discerning and carefully separate the wheat from the chaff.

Changes in the Macro Environment: The Return of Liquidity and Policy Tug-of-War

The most significant theme running through next year's economic environment is the abundance of money. The South Korean government's budget for next year is 727.9 trillion won, an 8.1% increase from the previous year. This signals an expansion of the money supply (M2). Typically, when liquidity increases and the value of the Korean won declines, the intrinsic value of real assets such as real estate is expected to stand out.

However, a broad-based upward trend like in the past is unlikely. The government is strongly pushing for a shift toward "productive finance" by tightening the Debt Service Ratio (DSR) regulations to manage household debt and raising the risk weightings for mortgage loans. In other words, while liquidity is expected to increase, the threshold for accessing finance will likely remain high. This policy misalignment will ultimately act as a catalyst, causing increased liquidity to flow into prime commercial real estate in locations less affected by lending regulations, or into core areas of the Seoul metropolitan region where buyers have strong financial resources.

The Commercial Market: The Rise of Prime Assets and Niche Sectors

The commercial real estate market is expected to reach a peak in the differentiation of assets based on location and rental yield. In particular, next year will see an improvement in the spread between the cap rate (capitalization rate) and lending rates, triggered by interest rate cuts. Large transactions that had stalled due to the burden of high interest rates may pick up again. Investors are expected to look beyond office investments and focus on niche sectors such as data centers, senior housing, and modern logistics centers. Meanwhile, prime offices in major areas of Seoul are expected to continue their solid rent growth, supported by persistently low vacancy rates.

The Coexistence of Corporate-Owned Real Estate and Global Risks

Investors should also pay attention to the value of real estate owned by corporations. In an environment of abundant liquidity and a weakening won, the asset revaluation of companies holding large-scale development sites will become a key momentum for rising corporate value. However, in the global market-especially in the United States-commercial real estate faces a concentration of large-scale loan maturities through next year. Debt stress could emerge with a lag.

The Residential Market: Gradual Recovery Driven by a Supply Drought

The housing market is expected to enter a recovery phase next year, driven by a shortage of supply. The sharp decline in housing starts due to soaring construction costs and high interest rates in recent years will lead to a reduction in the number of new units available for occupancy starting next year. This supply-demand imbalance will serve as a strong support for prices. While transaction volumes are likely to bottom out and gradually recover, demographic constraints and lending regulations will manifest differently across regions.

As a result, in 2026, the residential market will see a growing concentration of demand for a single high-quality property, with the gap between Seoul and the metropolitan area and the provinces widening further. The success or failure of real estate investment now depends not simply on whether you own property, but on what you own.

Hyosun Kim, Chief Real Estate Specialist at NH Nonghyup Bank