South Korea’s overheated housing market is showing signs of cooling down, as Seoul housing prices have inched down in recent months with persistent inflation and soaring interest rates squeezing household budgets.
According to the Land Ministry, apartment prices in Apgujeong-dong, a wealthy neighborhood in Gangnam-gu, Seoul, dropped by as much as 300 million won ($230,000) in June from the previous month. A price slowdown was palpable in other affluent Seoul districts like Songpa-gu and Mapo-gu, where recent price falls ranged from as low as 120 million won and as high as 200 million won over a two-month period.
A survey by local property technology firm and listing platform Zigbang showed that households were holding off on housing purchases because of a rate hike, which would worsen their repayment burdens. Six in 10 Koreans planning to buy homes believe housing prices will start to fall in the second half of this year, according to the survey, which was conducted on 1,727 Zigbang app users from June 20 to July 4. The Bank of Korea is expected to back a sharper-than-expected rate raise Wednesday to tame persistent inflation.
More people living in Seoul and its surrounding areas of Incheon and Gyeonggi Province -- where demand continues to outstrip supply, fueling soaring prices -- are betting on falling prices than those living elsewhere. More first-time homebuyers forecast a fall in housing prices than those with homes.
Aside from repayment burdens, the respondents cited shrinking demand, an economic downturn and increased home supply prompted by recently relaxed property curbs as factors contributing to a potentially cooling housing market in the months to come. Meanwhile, more respondents expected to see a drop in the cost of “jeonse,” where tenants pay a lump-sum cash deposit to rent a home and receive it back once the standard two-year contract expires.
There are more jeonse landlords, and tenants are increasingly finding monthly rentals more appealing than the two-year deals, according to the survey. Monthly rentals were preferred over jeonse in January-May this year for the first time, according to the Land Ministry.
