Government "Improvement of housing supply and market trend indicators... mid- to long-term stabilization expected"

The increase in permits and construction starts and the slowdown in the growth rate of sales prices in Seoul were discussed.

“Supply and demand conditions will significantly improve from 2028 when the 3rd new city begins to move in.”

(Seoul = Yonhap News) Reporter Lim Ki-chang = The government interpreted the recent continued downward trend in apartment prices in Gangnam 2 districts (Seocho and Gangnam) and improvement in housing supply leading indicators as positive signs of housing market stabilization, and was optimistic about the possibility of mid- to long-term market stability.

The Ministry of Land, Infrastructure and Transport announced in a press release on the 18th that as a result of the housing supply measures encompassing the private and public sectors, such as the housing supply expansion plan on September 7 last year and the rapid housing supply plan on August 13 this year, as well as the housing market stabilization measure on October 15 last year, which is a demand management plan, leading indicators of housing supply are improving and some downward stabilization indicators of the market are appearing.

The Ministry of Land, Infrastructure and Transport explained that licenses, a leading indicator of supply, recorded 36,000 households in Seoul over the past six months (March to August), an increase of 74% compared to the same period last year and exceeding the long-term average for 2016 to 2025 (28,000 households). In the past six months, construction started in Seoul amounted to 17,000 households, which is less than the long-term average (31,000 households) but a 45% increase from the same period last year.

In terms of market trends, while sales prices in Gangnam and Seocho-gu have been falling for 10 consecutive weeks, the rate of increase in Seoul sales prices has slowed since July, and apartment sales volume in Seoul has decreased overall since May, with the number of recent sales listings reaching about 74,000, a 30% increase compared to the beginning of this year.

In terms of market sentiment, the consumer sentiment index in the Seoul housing sales market has shown a downward trend since July due to factors such as price declines in major regions and interest rate increases, emphasizing that overheated sentiment is calming down.

In the short term, the government believes that it is necessary to closely monitor the market situation due to the combination of upside factors such as a decrease in the number of occupancy, an increase in national income, expansion of purchasing power due to the boom in the semiconductor industry, and expectations of a rise in housing prices, and downside factors such as an increase in the base interest rate and a rise in mortgage interest rates.

However, in the mid- to long-term, it is predicted that the supply and demand conditions will improve significantly from 2028, when the 3rd new city occupancy begins in earnest, as the performance of supply measures is gradually becoming visible, such as increased permits and construction starts in the public and private sectors.

Following the significant slowdown in Seoul's household growth rate from 2.20% in 2020 to 0.83% last year, the possibility of a downward turn after 2038, and the effect of the distribution of housing demand in Seoul and the metropolitan area to local areas due to the full-fledged promotion of national balanced development policies such as the 5 poles and 3 special forces and the relocation of secondary public institutions were also presented as mid- to long-term stabilization factors.

The Ministry of Land, Infrastructure and Transport explained that the decline in jeonse and monthly rent listings, which is one of the major issues in the real estate market, has been a trend that has appeared since 2024 and is not a problem limited to land transaction permit areas in Seoul and the metropolitan area, but a nationwide phenomenon caused by a lack of supply.

In addition, the Ministry of Land, Infrastructure and Transport analyzed that the main cause of the decline in jeonse and monthly rent listings is the sharp decline in the number of move-ins that began in earnest last year, and that this is a cause of supply and demand instability, especially in the metropolitan area where the housing penetration rate is less than 100%.

The Ministry of Land, Infrastructure and Transport emphasized, "We will continue to closely monitor the market situation and do our best to ensure housing stability for the people by responding to the market situation in a timely manner by maximizing stability factors such as supply expansion and minimizing instability factors."