Seoul's apartment market is heating up again, driven by a complex mix of policy changes, tight credit, and a looming supply crisis.
First, a major tax policy shift has distorted the market. The grace period for heavy capital gains taxes (CGT) on multi-homeowners ended on May 10. This created a rush of "last-minute" sales before the deadline, followed by a sudden drop in listings. With fewer homes for sale, sellers gained leverage, making prices—especially in prime areas like Gangnam—resistant to falling. This explains the district's surprising rebound after 12 weeks of decline.
Second, borrowing money has become more difficult. The Bank of Korea is keeping interest rates on hold to fight inflation, which recently ticked up again to 2.6%. Mortgage rates are at their highest in over two years, and new rules like the 'Stressed DSR' are further limiting how much people can borrow. This is splitting the market: cash-rich buyers are targeting prime properties, while others are forced to look for more affordable options or promising reconstruction targets, concentrating demand in specific niches.
Third, a severe shortage of new apartments is on the horizon. Projections show a dramatic drop in new housing completions in Seoul for 2026, creating a "supply cliff." This is already squeezing the unique Korean rental market, known as 'jeonse.' As jeonse prices skyrocket due to the lack of available units, some renters are choosing to buy instead, adding more fuel to the fire and pushing up sale prices.
In essence, these three factors—a tax-induced supply squeeze, tighter credit polarizing demand, and a fundamental lack of new homes—have combined to accelerate price growth across Seoul.
- Capital Gains Tax (CGT) Moratorium: A temporary suspension of higher taxes on profits from selling real estate, which was aimed at encouraging multi-homeowners to sell their properties.
- Jeonse: A unique Korean rental system where a tenant pays a large lump-sum deposit (often 50-80% of the property's value) instead of monthly rent. The landlord returns the full deposit at the end of the contract.
- Stressed DSR (Debt Service Ratio): A regulation that calculates a borrower's ability to repay loans by adding a "stress" interest rate to the current rate. This tightens lending standards by reducing the maximum loan amount available.