Seoul home prices rise longest and fastest, demanding a supply push

Seoul apartment prices have risen for 85 straight weeks, underscoring calls for faster housing supply as demand controls fail to cool the market.

Seoul apartment prices are poised to set a record for the longest sustained rise. According to the Korea Real Estate Board, prices have climbed for 85 consecutive weeks, from the third week of January last year through the fifth week of August this year.

That ties the record set under the Moon Jae-in administration. But this time, the increase has been far steeper. Seoul apartment prices have risen a cumulative 15.84 percent over the latest 85 weeks, more than twice the 7.69 percent recorded during the comparable Moon-era streak. It is the largest increase since the Korea Real Estate Board began compiling the statistics. The record could be broken in the first week of September.

The government's overwhelming reliance on suppressing demand has reached its limits. It has tightened lending and announced heavier taxation first for owners of multiple homes and then for owners of single homes they do not occupy, yet prices continue to rise.

Three supply packages have promised 1.58 million homes, but few will be completed during the current administration's term, making a near-term supply shortage unavoidable. Tax and lending restrictions are narrowing the path to homeownership while jeonse (lump-sum deposits) and monthly rents are also rising.

Apartment prices in the Gangnam, Seocho, Songpa and Gangdong districts fell after the tax revision plan was announced, but demand is spilling into other areas. Although the government softened parts of its tax proposal amid concerns over resistance, the framework of heavier taxation remains.

The solution lies in expanding supply and restoring market functions. Regulations on redevelopment and reconstruction, crucial sources of urban housing, should be eased decisively to signal that homes will be supplied steadily. Punitive taxes that encourage panic buying and worsen rental shortages, along with lending restrictions on genuine homebuyers, also need revision. This is not the time to rely on controversial sites such as Yongsan Park and the Gwacheon racetrack.

A KB Kookmin Bank simulation suggests that if prices keep rising, nearly all Seoul homes outside the Gangbuk, Geumcheon and Dobong districts could become subject to the comprehensive real estate holding tax by 2030.

Yet President Lee Jae Myung has said Korea should prepare for a collapse in housing prices. The public has reason to be puzzled.