Following the government's stringent loan regulations, the Bank of Korea is slowing down interest rate cuts, drawing attention to the direction of housing prices. As a result, transaction volumes have sharply decreased. However, experts' opinions are divided on whether prices will also fall.
On the 14th, according to the Bank of Korea, the Monetary Policy Committee held a monetary policy meeting on the 10th and unanimously decided to 'freeze interest rates.' Housing prices, along with tariffs, were highlighted as the background for the decision on that day's base rate. Bank of Korea Governor Lee Chang-yong noted, "Managing household debt and stabilizing market expectations to prevent a rise in housing prices in the metropolitan area are priorities of the policy." Despite concerns about an economic downturn, controlling excessively rising housing prices has become a priority of monetary policy.
With the government's 6.27 measures implementing stringent loan regulations, housing transactions have rapidly decreased. According to an analysis of the actual transaction disclosure system by the Ministry of Land, Infrastructure and Transport, there were only two apartment sales in Seocho District between the 28th, immediately after the announcement of the 6.27 loan regulations, and the 8th of this month. Gangnam District (17 transactions) and Songpa District (10 transactions) also saw a significant drop in transaction volumes. This is a stark contrast to the 100 transactions in Seocho District, 277 in Gangnam District, and 248 in Songpa District recorded from the 1st to the 27th of last month, indicating a 'transaction cliff.'
The surge in apartment prices, which had been continuing, has also narrowed. According to the Korea Real Estate Board, as of this week (on the 7th), apartment prices in Seoul rose by 0.29%, down from 0.40% the previous week. The increase narrowed in 21 of the 25 autonomous districts in Seoul. In particular, the rate of increase in the southeast region, which includes the three districts of Gangnam and Gangdong, was recorded at 0.37%, significantly lower than the previous week (0.7%). The Korea Real Estate Board stated, "While the upward trend continues in some preferred complexes such as new constructions and redevelopment projects, the deepening wait-and-see trend among real estate market participants and the overall decrease in inquiries are contributing to the reduced increase across Seoul."
However, there is no certainty that the narrowing of the price increase will lead to a decline. After the loan regulations, record-high prices were reported outside the Gangnam area. A 84㎡ unit in Magok M Valley 6 Complex in Magok-dong, Gangseo District, was sold for 1.6 billion won on the 29th of last month, setting a new record for that size. A unit of the same size was sold for 1.495 billion won in early last month, meaning it has increased by over 100 million won in less than a month. In the southwestern region of Seoul, including Gangseo District, a 'balloon effect' has been observed. In Gangseo District (0.13%→0.25%), Gwanak District (0.1%→0.19%), Guro District (0.11%→0.18%), and Geumcheon District (0.08%→0.09%), the rate of increase has actually grown compared to the previous week.
Experts predict that a lull in transactions will be unavoidable for the time being. The amount of housing loans is limited to 600 million won, suppressing demand from those looking to obtain their own homes through loans. However, they believe that housing prices in major areas, including the three Gangnam districts and Yongsan District, will not trend downward. This is largely due to the expected decrease in supply next year and the continuing high demand. According to Real Estate R114, the estimated number of apartments scheduled for occupancy in Seoul this year is 37,681 units, but it is expected to plunge to around 9,600 units next year. In the following year, 2027, it is anticipated to further decrease to around 8,200 units.
Ham Young-jin, head of the real estate research lab at Woori Bank, said, "Even if the Gangnam area is less sensitive to loan regulations, redevelopment projects will still be affected by relocation loan regulations," adding, "For the time being, price growth rates will slow down, and a decrease in transactions will be inevitable." He continued, "The housing occupancy volume in the three Gangnam districts and Yongsan District is expected to be around 3,000 units next year, making it difficult to expect declines considering concerns over supply reduction and preferences for new developments in the Gangnam area."
Yoon Ji-hae, head of the research lab at Real Estate R114, noted, "This loan regulation is so strong that a sharp decrease in transactions and even a short-term decline seem possible, especially in high-price areas." She added, "However, any decline will likely be temporary," stating that "once resilience builds up, cash-rich investors will return to the market and continue the existing trend."