The Monetary Policy Committee of the Bank of Korea lowered the base rate to 2.5% on the 29th, drawing attention to the potential impact on 'housing prices.' The market anticipates that the effects of the rate cut will be minimal, especially with the looming loan regulations. However, as the shortage of apartment supply continues in the long term, prices are likely to trend upward in major areas of Seoul.
The Monetary Policy Committee of the Bank of Korea lowered the base rate from 2.75% to 2.50% by 0.25 percentage points during its monetary policy direction meeting on this day. This is interpreted as a measure in response to the low growth crisis. Additionally, the Bank of Korea significantly revised its real gross domestic product (GDP) growth forecast for this year down to 0.8% from 1.5%. The forecast for next year was also lowered from 1.8% to 1.6%. It is the first time since relevant statistics began to be compiled after the Korean War in 1953 that South Korea's economic growth rate is expected to record around 1% for two consecutive years.
In the real estate market, the 'rate cut' is not expected to have a significant immediate impact on housing prices. This measure was already anticipated due to the economic downturn, and with the recent stabilization of the won-to-dollar exchange rate at around 1,300 won, conditions for lowering rates have been secured.
Above all, with the introduction of the three-phase debt service ratio (DSR) on July 3, it is believed that the effects of the rate cut will be offset. Although a reduction in the base rate is typically considered a factor for rising housing prices, the restrictions imposed by loan regulations limit changes for housing demanders. Additionally, as the city of Seoul has implemented a land transaction permission system across the three districts of Gangnam and the entire Yongsan district since March, and with an early presidential election scheduled for next month on the 3rd, there is an environment that may strengthen the market's wait-and-see stance.
Yoon Ji-hae, head of the research lab at HDC Real Estate Labs, noted, "It is questionable whether the rate cut will stimulate housing demand in the current loan regulation environment," adding, "While expectations of a gradual rate cut are certainly a factor for increased demand, the overall effect of expanding real estate demand will likely be minimal in the face of the wall of loan regulations."
However, the prevailing outlook is that housing prices will continue to rise as a decrease in apartment supply is expected in the long term. The average number of apartments supplied in Seoul over the past 10 years (2014-2023) was 35,939 units, but it is expected to be 28,014 units last year, 46,738 units this year, and 28,614 units next year. In Gyeonggi Province, the usual supply has been around 110,000 units, but it is projected to drop sharply to 70,000 units this year and next.
Ham Young-jin, head of the real estate research lab at Woori Bank, stated, "The financial environment in the real estate market exhibits a coexistence of positive and negative factors," noting, "With the rate cut and the decrease in apartment supply leading to fewer listings, the ongoing trend of increasing monthly rents will continue, and concerns about the contraction of housing supply remain, making it highly probable that price increases in major areas of Seoul will persist."