As the KOSPI index repeatedly hits record highs, a study drawing attention says stock revenue will ultimately flow into Seoul apartments. It says Seoul apartment prices lag the KOSPI index by two months. This means when the KOSPI index rises, Seoul apartment sale prices follow with a two-month lag.
The Lee Jae-myung administration is striving to shift funds concentrated in real estate into the Korean stock market. On Sept. 18, the president met with securities firm research center heads and said, "I will make it so that a saying can emerge that returning to the Korean stock market happens in order of intelligence," pledging to promote stock market revitalization, including the "KOSPI 5000" pledge. It was the first time a president held a roundtable with securities firm research center heads.
On the 15th, Oh Ji-yoon, a professor of economics at Myongji University, released research analysis results titled "The Seoul apartment market in October where FOMO (Fear Of Missing Out) intersects with a stock market rally." "FOMO" refers to a phenomenon in which buyers fear they could lose out if they miss this opportunity. Oh is an economist who worked at the Bank of Korea and the real estate research team at the Korea Development Institute (KDI).
Oh assessed that the pattern of Seoul apartment actual transaction prices lagging the KOSPI index by two months has stood out since 2020. This is the result of analyzing the correlation between the KOSPI index and Seoul apartment actual transaction prices (Korea Real Estate Board (REB)), observing that gains in stock prices since 2013 through July of this year were used for household home purchases. From 2020 through July of this year, the correlation coefficient between the KOSPI index and Seoul apartment actual transaction prices was analyzed at above 0.7. Through December 2019 from 2013, this correlation coefficient was only 0.4.
Since 2020, as the linkage between interest rates and the asset market has tightened, the connection between the KOSPI index and Seoul apartment prices has also strengthened. The starting point was the COVID-19 pandemic in 2020. As a low interest rate stance persisted, liquidity surged. The Monetary Policy Committee of the Bank of Korea sharply lowered the base rate in March 2020 from 1.25% to 0.75%, then cut it again in May of the same year to an all-time low of 0.50%. At the time, the government provided emergency disaster relief funds to restore consumption capacity. Emergency disaster relief funds for COVID-19 response in 2020 totaled 14.3 trillion won.
In 2020–2021, the nationwide apartment market enjoyed an unprecedented boom on the back of liquidity. According to KB Real Estate, the nationwide annual housing sale price index rose 8.35% in 2020 and 14.95% in 2021. The 2021 home price increase was the largest since the surge immediately after the International Monetary Fund (IMF) foreign exchange crisis. Nationwide apartment prices rose 20.18% in 2021. Afterward, in 2023, the real estate market entered a calming phase.
Oh viewed that apartment prices are rising again in 2024, but the phase differs somewhat from 2021. Since 2024, buying by so-called Seoul–capital region "power couples (high-income dual-income couples)" intertwined with policy side effects has been pushing up apartment prices centered on Seoul, the analysis said. Regional balance policies and concerns about regional extinction, Oh noted, have instead strengthened buyers' "Seoul concentration phenomenon."
She added that two major real estate measures rolled out after the launch of the Lee Jae-myung administration are producing side effects. With the June 27 measures applying a 600 million won cap on mortgage loans, home prices rose sharply in accessible districts such as Mapo-gu, Seongdong-gu, and Gwangjin-gu. After the Sept. 7 supply measures, concerns over moving for self-occupation and additional designations of land transaction permit zones accelerated preemptive gap investing, the analysis said.
Oh said, "If you make money in stocks, it will eventually become a lump sum that moves into apartments," adding, "Due to vague fears of a decline in the value of our country's currency and the desire to secure safe assets, the upward trend in Seoul apartment prices is likely to continue for the time being."
Although the Lee Jae-myung administration has recently warned about funds flocking to real estate and is trying to induce funds to move into the stock market, the implication is that the result could be the opposite. Stocks cannot replace Seoul apartments, which have already established themselves as safe assets. On the 14th, the KOSPI index set an intraday record high of 3,646.77.
Oh said, "From the past, when people obtained a lump sum through coins and stock investing, the flow has continued where it eventually moved into Seoul apartments," adding, "It is very difficult to pull money intended for buying dwellings into stocks, and the opposite scenario could appear."