This Year’s Seoul Housing Prices Are 'Cloudy'... When Will You Be Able to Own a Home?

[Asia Economy Reporters Mun Jiwon, Lee Chunhee] Seoul housing prices have reached a turning point. According to real estate indicators, the decline in housing prices in the Gangnam area of Seoul is clear, but some newly built apartments are hitting record highs, creating a chaotic period where rises and falls coexist. Since Gangnam housing prices serve as a barometer for the Seoul and metropolitan area housing markets, not only homeowners but also prospective buyers and investors are closely monitoring market trends.

On the 13th, Asia Economy's investigation revealed that major experts foresee a high likelihood of Seoul housing prices declining this year due to the economic downturn caused by the novel coronavirus disease (COVID-19). The recent price drop is the result of a combination of the government's stringent regulations, a sharp rise in official property prices, and the economic recession triggered by COVID-19.

Although there is a possibility of a slight rebound due to expectations of deregulation after the general election, experts believe that the overall economic contraction limits the market's ability to reverse the trend.

◆A Downward Trend Is Inevitable for the Time Being= Yang Yonghwa, head of the Real Estate Advisory Center at Hana Bank, stated, "There are not many factors that could cause the current housing price weakness to rebound," adding, "With forecasts suggesting that this year's economic growth rate could remain in the 0% range due to the COVID-19 situation, this atmosphere is expected to continue at least through the second half of this year."

Ko Jongwan, director of the Korea Asset Management Research Institute, also explained, "Housing price trends trigger a chain reaction from Gangnam to the surrounding urban areas, then to peripheral regions, and finally to the Gyeonggi area," adding, "Considering this pattern, the recent decline in housing prices in Gangnam and Seoul should be seen as a precursor to a broader downturn in the real estate market."

In fact, most indicators that can gauge the future real estate market are pointing toward a 'decline.' The nationwide Housing Business Survey Index (HBSI) by the Korea Housing Industry Research Institute recorded 42.1 this month, the lowest since the survey began in December 2013. This index, derived from surveys of about 500 construction companies, indicates that the lower it falls below 100, the more pessimistic the outlook for the construction industry.

One of the representative leading indicators of housing prices, the KB Leading Apartment 50 Index, also shifted to a downward trend last month after 11 months. This index shows the market prices of 50 apartment complexes nationwide that have high prices and large numbers of households. Since apartment prices tend to follow the 'flagship' complexes in the area, this suggests that general apartment prices are also likely to turn downward.

◆"Recovery Will Be Slow"…Limited Effect from the General Election= However, experts also predict the possibility of a 'Nike rebound'?a gentle upward trend in housing prices starting next year?if the COVID-19 situation is resolved early. Yang said, "If the situation calms down, effects from base rate cuts or quantitative easing policies could positively influence the market," but added, "While there is room for a price reversal, a sharp recovery in a short period is unlikely."

Park Hapsu, senior real estate specialist at KB Kookmin Bank, diagnosed, "If the COVID-19 situation is resolved in the first half of the year, the high-priced housing market in Seoul's Gangnam area will stabilize with about a 10% drop in market prices, while the outskirts of Seoul, the metropolitan area, and other provinces will see a 5-10% decline."

Experts also predict that the effect of the general election will be limited. Although the opposition and ruling parties have proposed easing some aspects of the comprehensive real estate tax, it is difficult to change the existing government policy direction.

Director Ko pointed out, "If measures such as lowering the comprehensive real estate tax for single-homeowners and easing loan restrictions are implemented depending on the election results, it may reduce the extent of the price decline, but it will only be a temporary rebound and cannot prevent a long-term decline."

Some also forecast that housing prices could rise due to the continued inflow of liquidity into non-regulated areas amid a low-interest-rate environment. Hong Chunwook, CEO of EAR Research, said, "While the high-priced housing market in the Gangnam 3 districts is undergoing adjustment, prices of mid- to low-priced homes in non-regulated areas are actually rising," adding, "Even if the economic recession continues, housing prices could increase by more than 3-4% by the end of the year."

◆It Is Advisable to Wait Before Buying a Home= Regarding the timing of purchasing a home, most experts recommend targeting urgent sales with significantly reduced prices but maintaining a wait-and-see stance until at least the second half of this year.

Park advised, "Since ultra-low-priced urgent sales may appear after May, real demand buyers should keep an eye on the market." Hong suggested, "Apartments priced below 900 million won in non-regulated areas will present good opportunities in the second half of the year."

However, the need to delay home purchases and maintain a cautious stance was also raised. Yang said, "Since the recession phase is expected to continue through this year, it is better not to rush and wait until the end of the year."

On the 5th, a resident of an apartment in Jongno-gu, Seoul, is watching the campaign site of a general election candidate held in front of the apartment with binoculars. Photo by Dongju Yoon doso7@

This content was produced with the assistance of AI translation services.