On the 10th, the Bank of Korea released an outlook that real estate purchase demand in the outskirts of Seoul and in Gyeonggi's "semiconductor belt (Dongtan, Hwaseong; Giheung, Yongin; Yeongtong, Suwon)" could expand due to wage increases for employees at major corporations driven by strong semiconductor exports and the impact of large performance bonuses. Although the government lowered the mortgage loan limit to a maximum of 200 million to 600 million won depending on home prices and the base rate has been raised for two consecutive meetings, apartment prices in key areas are under upward pressure.
◇ Outer Seoul and the semiconductor belt rise, Gangnam's three districts and Yongsan fall
In its currency and credit policy report released that day, the Bank of Korea said, "We judge that financial imbalance risks are accumulating, as the greater Seoul area's dwellings prices continue to rise sharply and household loans also show a steady increase," adding, "Apartment prices in the greater Seoul area continued to rise, centered on mid- and low-priced dwellings, due to concerns over a lack of supply and the shift to purchases by end users prompted by instability in the jeonsei and monthly rent markets."
Based on Bank of Korea tabulations of Korea Real Estate Board (REB) data, as of Aug. 31, the week-over-week apartment price increase rate in outer Seoul was 0.43%, higher than the Han River belt's 0.15%. This has persisted for 30 consecutive weeks. In contrast, the three Gangnam districts and Yongsan recorded -0.17% as of Aug. 31, marking a decline for the third straight week.
The rise in home prices was particularly pronounced in the semiconductor belt of southern Gyeonggi. According to the Bank of Korea, the number of apartment transactions setting new record-high prices in Dongtan, Hwaseong; Giheung, Yongin; and Yeongtong, Suwon was 309 in August alone, 7.3 times higher than the same period a year earlier (37). Expanding the window to the past three months, the figure was 1,616, up 7.2 times from the same period a year earlier (196).
◇ "Nominal wage increases are boosting demand for purchasing dwellings"
The Bank of Korea cited income growth as the reason for rising home prices in specific areas. It said wage increases and large performance bonuses for employees at major semiconductor firms have flowed into real estate investment. SK hynix paid the largest-ever performance bonus in February—2,964% of base salary. If this continues, it could stimulate the real estate market.
The Bank of Korea said, "Improvements in corporations' earnings and increases in nominal wages are expected to raise household purchasing power and boost demand for purchasing dwellings." However, it projected that transactions of ultra-high-priced dwellings, where tax burdens have risen due to the government's "real estate tax reform plan," would contract.
The Bank of Korea judged that new dwellings starts have been weak in recent years, making it difficult to improve supply in the short term. In the first half, the number of dwellings starts in the greater Seoul area was 65,000 units, the lowest since 2023 (53,000 units). This year's move-ins totaled 104,000 units. In the data released by the Bank of Korea, that is the lowest since 2016.
The Bank of Korea noted that loan demand could increase due to a "comprehensive financial package" that raises this year's household liability target. Earlier, the Financial Services Commission raised this year's household loan growth target from the previous 1.5% to 3%. As a result, lending capacity in the financial sector is estimated to expand from about 30 trillion won to 60 trillion won.
Regarding higher interest rates, the Bank of Korea said they "will help curb household loan demand and temper expectations for rising dwellings prices," but added, "The impact on loan demand will vary depending on the extent of income condition improvements, so related trends need to be closely monitored." Earlier, Governor Shin Hyun-song of the Bank of Korea also said at a press conference after last month's rate hike decision, "It is unrealistic to rein in home prices with interest rates."