South Korea’s residential property market is moving on two sharply different tracks. While the national market remains largely stalled, prices in and around Seoul continue to climb, deepening the divide between the capital region and the rest of the country.
Data from the Bank of Korea shows that the Nationwide House Price Index rose just 0.30 percent year-on-year as of September 2025, pointing to broad stagnation at the national level. Beneath this modest headline growth, however, regional trends reveal a much more polarized picture.
Since July, price momentum in Seoul and its surrounding metropolitan areas has shown early signs of cooling after the government introduced fresh household debt controls in June. Even so, price growth remains heavily concentrated in the capital belt. As of September, the metropolitan House Price Index stood 1.71 percent higher than a year earlier. Seoul alone posted a far stronger 4.76 percent annual increase, although this was slightly lower than the peak of 5.1 percent seen in July.
By contrast, housing markets outside the capital region have now been declining for a third straight year. Oversupply, weak population growth, and rising inventories continue to weigh on provincial markets, widening the gap between urban and regional property values.
The price gap is also visible in new apartment sales. Data from the Korean Statistical Information System shows that the 12-month rolling average sale price for new apartments in Seoul reached KRW 13.779 million per square metre as of September 2025. This is more than 2.3 times the national average of KRW 5.906 million per square metre, underscoring how sharply capital-region prices have pulled away from the rest of the country.
Looking ahead, the Bank of Korea had earlier projected that apartment prices in Seoul would rise by nearly 5.9 percent by the end of December 2025 compared to end-June levels. However, after the recent tightening of lending rules, that forecast has been cut to a range of 3.7 to 4.3 percent. Policymakers estimate that new macro-prudential measures alone have shaved 1.6 to 2.1 percentage points off expected price growth.
Despite these efforts, analysts expect Korea’s housing market to remain structurally divided through 2026. The Seoul metropolitan area is likely to continue facing upward price pressure due to limited new home supply and resilient demand, while non-capital regions are projected to struggle with weaker fundamentals and subdued prices.
Long policy cycles have shaped today’s market
The current divide is the result of more than two decades of policy-driven cycles. In the early 2000s, South Korea experienced a powerful housing boom, with nominal house prices surging 11.51 percent year-on-year in 2006. Speculation was strongest in Seoul and other major cities.
That momentum slowed after the 2008 global financial crisis. Although nominal prices still rose 5.91 percent in 2008, real growth almost vanished. The early 2010s then saw extended stagnation, with prices actually falling in 2012 amid weak demand and economic uncertainty.
A policy shift in 2014 reignited the market. Lower interest rates and looser mortgage rules pushed prices higher in 2014 and 2015, alongside a spike in housing starts to over 716,000 units in 2015. The government then moved to cool speculative activity through stricter loan-to-value and debt-to-income limits in 2016–2017.
By 2019, prices were slipping again. A sharp rebound followed during the pandemic years. In 2020 and 2021, low interest rates and stay-at-home demand triggered the strongest price surge since the mid-2000s. That cycle reversed abruptly in 2022, when aggressive rate hikes and renewed mortgage restrictions pushed nominal prices down by 4.68 percent and real prices by more than 9 percent.
The market appeared to bottom out in 2023, with price declines easing but new housing starts plunging to just 242,188 units as developers turned cautious. Early recovery signals emerged in 2024, but activity has remained well below historical averages.
Capital region drives transactions in 2025
Demand data for 2025 continues to reflect this uneven recovery. According to the Ministry of Land, Infrastructure and Transport, a total of 532,093 residential transactions were recorded nationwide in the first nine months of 2025, up 8.28 percent from a year earlier.
The Capital Region led this expansion with transaction volumes rising 14.8 percent. Seoul recorded the sharpest jump at 30.3 percent, followed by Gyeonggi at 11 percent. Incheon, however, saw a 4.2 percent decline. Outside the capital, performance remained mixed, with some cities showing modest growth and others reporting flat or negative trends.
Concerned about rising prices and household debt in overheated markets, regulators moved to tighten credit again in mid-2025. On June 27, the Financial Services Commission and MOLIT jointly announced stricter loan-to-value rules for buyers in high-priced districts. Additional curbs in September and October cut LTV limits to 40 percent in speculation-prone zones across Seoul, Gyeonggi, and parts of Incheon.
The government has also acted to restrict foreign buying. As of end-2024, foreign nationals owned more than 100,000 homes in South Korea, with ownership heavily concentrated in the capital region. In August 2025, Seoul and key neighbouring areas were placed under the country’s first foreign-buyer trading-permit system, allowing purchases only for self-use.
Real-estate economist Kwon Dae-jung has said that limited restrictions on foreign purchases, based on reciprocity, are necessary to stabilise domestic housing conditions.
Supply struggles deepen the regional gap
On the supply side, conditions remain weak despite government efforts to revive construction. Nationwide housing completions fell 5.4 percent year-on-year in the first nine months of 2025 to 273,307 units. Housing starts dropped even more sharply, down 11.29 percent to 170,787 units.
In the Capital Region, completions edged up 1.96 percent, driven largely by a surge in Seoul. However, new starts continued to fall both inside and outside the capital belt, reflecting ongoing developer caution amid high financing costs and tighter project-finance conditions.
Building permits, a key indicator of future supply, have also remained subdued. Across the country, permits were almost flat year-on-year in the first three quarters. The Capital Region saw a strong rise, but approvals in the rest of the country fell by over 16 percent, pointing to growing long-term supply risks outside Seoul.
The government has reiterated that boosting supply in the metropolitan area is its top priority, with plans to deliver 1.35 million homes by 2029. However, analysts warn that financing bottlenecks and high construction costs continue to delay large-scale execution.
For now, South Korea’s housing story remains one of sharp contrasts. Demand, price growth, and supply are tightly clustered around Seoul, while provincial markets continue to face structural headwinds. With demographic concentration, limited land availability, and cautious developers, this divide is expected to shape the country’s property market well into 2026.
