Seoul: On a typical weekday, a real estate agency in Seoul's Mapo District experiences a flurry of phone inquiries from prospective homebuyers. However, the agency faces a shortage of listings, primarily due to recent price hikes that have prompted homeowners to withdraw their offerings in anticipation of further increases.
According to Yonhap News Agency, the transition to the Lee Jae-myung administration has coincided with a heating up of the housing market, posing an early policy test for the new president. Just days following the June 4 election, data indicated that apartment prices in Seoul surged at their fastest rate this year.
The Korea Real Estate Board reported that apartment prices in the capital increased by 0.26 percent in the second week of June, reaching peak levels reminiscent of the previous property boom in August 2024. This rally, initially concentrated in Seoul's affluent southern districts such as Gangnam, Seocho, and Songpa, has spread to northern areas like Yongsan and Mapo, as well as parts of Gyeonggi Province, including Gwacheon and Bundang.
Experts attribute the recent price surge to a combination of factors. The removal of political uncertainty post-election, expectations of a liquidity boost through the administration's proposed 20 trillion won supplementary budget, and potential interest rate cuts have all fueled housing market demand. President Lee's campaign promise of a supply-focused housing policy, diverging from the regulation-heavy approach of former President Moon Jae-in, has also resonated with the market.
However, experts warn that unchecked demand could lead to a repeat of the rapid price escalation witnessed between 2017 and 2021, a period criticized as a policy misstep under the Moon administration. The Lee government is yet to detail its real estate policy, with key ministerial appointments still pending. The presidential state affairs committee, acting as Lee's transition team, is expected to unveil a comprehensive policy blueprint in the coming weeks.
Meanwhile, financial authorities have begun taking action. On Monday, the Financial Services Commission and the Financial Supervisory Service met with local lenders, urging tighter lending practices in response to the overheating market. Acting Finance Minister Lee Hyoung-il also chaired an interagency meeting to assess market conditions and pledged to use all available policy tools to prevent speculative behavior.
Market observers suggest that further regulations, including stricter lending rules, may be necessary to control price growth. Designating certain areas as price-adjustment zones or speculative overheating districts could be strategies to suppress demand. Additionally, targeted taxation, such as heavy acquisition taxes on multiple home owners, might be reintroduced to manage demand.
Some analysts caution that the Bank of Korea, which has already cut its policy rate by 0.75 percentage points since last year, may slow the pace of further rate cuts due to property market risks. BOK Governor Rhee Chang-yong expressed concerns about potential asset price inflation during a recent press briefing, emphasizing the need to avoid repeating past mistakes made during the COVID-19 period.