Seoul Apartment Prices Rise 0.26%, Can the 50,000 New Housing Supply Plan Cool the Market?

Despite the government's stringent regulations and discussions on tax reform, Seoul apartment purchase prices rose 0.26% in the first week of August, widening the upward trend. In response, the government held the 2nd Real Estate Policy Inspection Meeting, chaired by President Lee Jae-myung, and initiated a large-scale new housing supply plan of '50,000+α' units in the metropolitan area.

Unstoppable Seoul Apartment Prices and Buying Sentiment

Currently, the real estate market is seeing a relay of new high prices centered around the Gangnam area and major station-area mega-complexes. In particular, the aftermath of the recently announced tax reform plan, which strengthened the comprehensive real estate holding tax standards, has led to a decrease in jeonse (deposit-based lease) and monthly rent listings. With increasing requests for tenant eviction, non-homeowners fearing a jeonse crisis are shifting towards buying. Despite the pressure of loan regulations, the 'demand concentration phenomenon' focusing on premium properties is driving up housing prices.

Key Points of the Government's 'Speed-Focused' 50,000-Unit Supply Plan

The 2nd Real Estate Policy Inspection Meeting focused heavily on 'new supply in the metropolitan area.' The core of this measure, expected to be announced as early as this month, includes the following:

• Utilization of Idle Land and Greenbelts: Converting military bases and idle land in urban areas for residential use, and securing housing sites by lifting restrictions on certain greenbelts with low conservation value.

Shortening Licensing Procedures: Going beyond simply proposing supply volumes, the government will deploy a 'speed war' by significantly simplifying administrative procedures that have previously been delayed, to bring forward actual construction and move-in dates.

Expansion of Public Housing Complex Projects: Expanding public housing complex projects, which develop aging urban areas at high density, to key locations in the metropolitan area.

Metropolitan Real Estate Outlook FAQ

Q1. Will this supply plan stabilize Seoul housing prices immediately?

Realistically, the short-term stabilization effect on housing prices may be limited. This is because housing supply typically takes at least 3 to 5 years from the announcement of the plan to actual move-in. However, it is expected to help calm aggressive panic buying by sending a strong signal to the market that 'sufficient volume will be supplied.'

Q2. What is the impact of the tax reform plan on the lease market?

Landlords facing increased property tax burdens are increasingly passing on the tax burden to rent or asking tenants to vacate to fulfill actual residence requirements. Combined with the relocation demand from large-scale urban maintenance projects, there are growing concerns that the jeonse and monthly rent crisis in the metropolitan area, including Gangnam, will worsen in the second half of this year.