Consecutive Interest Rate Hikes Impact... Seoul Apartment Buying Sentiment Hits Lowest in 3.5 Years

Apartment complex in Seoul area (Photo by Asia Economy DB)

[Asia Economy Reporter Ryu Tae-min] As consecutive interest rate hikes continue to drive down housing prices, Seoul apartment buying sentiment has hit its lowest point in 3 years and 6 months. All five major districts in Seoul saw simultaneous declines, with the Seoul apartment sales supply-demand index falling for the 26th consecutive week.

According to the Korea Real Estate Board on the 5th, this week's (based on the survey on October 31) Seoul apartment sales supply-demand index dropped 2.5 points (p) from last week's 75.4 to 72.9. This marks the 26th consecutive week of decline since the first week of May (91.1), and numerically, it is the lowest figure in 3 years and 6 months since the fourth week of April 2019 (72.4). The drop in the index was more than four times larger than last week's (0.6p). The sales supply-demand index being below the baseline of '100' means there are more people wanting to sell houses than those wanting to buy in the market.

Looking at Seoul by district, the sales supply-demand index fell across all five major districts. The Northeast area, including Nowon, Dobong, and Gangbuk districts, recorded the lowest index at 67.3 this week, down from 69.6 last week. The Northwest area, including Mapo, Eunpyeong, and Seodaemun districts, decreased slightly from 68.2 to 67.9, and the Central area, including Jongno, Yongsan, and Jongno districts, dropped from 70.1 to 69.3, falling into the 60s.

The Southeast area, which includes the Gangnam 4 districts and fell below 80 last week, declined further to 77.4 this week. The Southwest area, including Yangcheon, Yeongdeungpo, and Gangseo districts, also dropped from 82.6 to 78.4, falling below 80.

The metropolitan area outside Seoul is also experiencing a downward trend. The Gyeonggi sales supply-demand index fell from 79.9 last week to 76.5 this week, and Incheon dropped from 75.2 to 74.5. For the entire metropolitan area, the index decreased from 77.9 last week to 78.2 this week.

This is interpreted as a contraction in buying sentiment due to consecutive interest rate hikes. On the 12th of last month, the Bank of Korea's Monetary Policy Committee implemented a 'big step' by raising the base interest rate by 0.5 percentage points at once, pushing the base rate up to 3.0%. As the base interest rate rose to the 3% level for the first time in 10 years, expectations that housing prices will continue to fall increased, reducing buying demand.

Meanwhile, this week's nationwide apartment jeonse supply-demand index fell to 80.6 from 82.3 last week, approaching a collapse below the 80 mark. Among these, Seoul's apartment jeonse supply-demand index plunged sharply from 75.4 last week to 72.9 this week.

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