As the Lee Jae-myung administration has announced three rounds of real estate measures in just four months in office, forecasts are emerging that apartment prices will keep rising. Many analysts say a "real estate déjà vu" is likely, citing frequent regulations and market backlash reminiscent of the Moon Jae-in administration. During Moon Jae-in's five-year term, apartment prices rose 111% in Seoul and 81% nationwide.
If back then it was the "one smart home," this time polarization is expected. That view reflects factors such as the Lee Jae-myung administration marshaling even stronger regulatory packages and the entrenchment of the "one smart home" trend. Analysis that market funds will flock to apartments in key areas of Seoul is gaining traction.
◆ This year, Apgujeong and Banpo up 3 billion won… Seoul jumped 111% during the Moon administration's five years
In the year the Lee Jae-myung administration took office, Seoul apartment prices rose a cumulative 8.99% from January to September. In 2017, when Moon Jae-in took office, the annual increase was 13.12%. Moon Jae-in took office in May 2017, and Lee Jae-myung in June this year, so the timing is not much different. Along with the fact there was a presidential impeachment and that tough regulations have been rolled out immediately after the inauguration, the two are "look-alikes."
According to data commissioned by ChosunBiz from Real Estate R114 on the 20th, in the first year Moon Jae-in took office, 2017, Seoul apartment sale prices rose 13.12% for the year, 23.09% in 2018, 10.06% in 2019, 18.76% in 2020, and 15.98% in 2021. Over five years, Seoul apartment prices surged more than double, up 111.09% cumulatively.
Through September this year, when the Lee Jae-myung administration took office, the cumulative increase in Seoul apartment prices was 8.99%. By district, Songpa-gu rose the most at 14.15%. It was followed by Gangnam-gu 11.93%, Seongdong-gu 11.44%, Seocho-gu 11.30%, Gangdong-gu 10.27%, Mapo-gu 9.69%, Yongsan-gu 9.39%, Gwangjin-gu 8.92%, Yangcheon-gu 8.72%, and Dongjak-gu 8.53%, with the "Han River belt," including the three Gangnam districts, concentrated on gains. Among the 25 districts of Seoul, the only area where apartment prices fell was Geumcheon-gu, down 0.13% in the same period. Gangbuk-gu and Dobong-gu posted modest increases of 0.86% and 0.99%, respectively.
Some point out that the surge in Seoul apartment prices reflects the impact of Seoul Mayor Oh Se-hoon reversing the designation and lifting of land transaction permit zones. At the time, areas such as Daechi-dong and Jamsil-dong, which had long been bound as permit zones, saw steep rises. The ruling party the previous day blamed the previous Yoon Suk-yeol administration and Seoul Mayor Oh Se-hoon for the apartment price spikes in parts of Seoul and Gyeonggi. Jun Hyeon-hee, a supreme council member of the Democratic Party of Korea, said of the Seoul real estate surge, "Mayor Oh Se-hoon's unprincipled announcement of lifting the permit system triggered the spike."
Looking at the top-rising complexes, areas unrelated to the city's permit-zone designations—such as Apgujeong, Banpo, and Seongsu—dominate. In Banpo-dong, a 178.94 square meter exclusive-use unit at Acro River Park has jumped 3.4 billion won this year. The average price, 6,375 million won at the start of the year, was 9,775 million won as of early this month. In Seongsu 2-dong, a 140.31 square meter exclusive-use unit at Trimage rose 3,055 million won over the same period, from 4.5 billion won to 7,555 million won. In Apgujeong's Gu Hyeon-dae, many had average sale prices exceeding 10 billion won. For Apgujeong Gu Hyeon-dae Phase 7, a 245.2 square meter exclusive-use unit had an average sale price of 11,218.75 million won in early October, and Apgujeong Gu Hyeon-dae Phases 1 and 2, a 196.85 square meter exclusive-use unit, was 10,346.5 million won.
There were also claims that in the early Moon Jae-in administration, the surge reflected the aftermath of the previous Park Geun-hye government's mass deregulation. However, despite unveiling numerous regulatory measures thereafter, housing prices were not tamed and instead expanded further. Both administrations had initial variables, but they cannot avoid responsibility for the subsequent trajectory.
A real estate expert who requested anonymity said, "It is true that the Seoul Metropolitan Government bears some responsibility for the sharp rise in Seoul apartment prices in the first half of the year," but added, "However, it cannot be denied that as soon as the new administration took office and unveiled the regulation-centered June 27 package, the backlash fueled additional steep increases."
◆ Right after inauguration, "demand-suppression" measures… Moon administration announced 28 packages in total
The Lee Jae-myung administration unveiled three major real estate packages within four months of taking office: the June 27 household loan management plan, the Sept. 7 housing supply expansion plan, and the Oct. 15 housing market stabilization measures. In particular, the first June 27 package led off with tough lending curbs by capping mortgage limits at 600 million won. The latest Oct. 15 package further tightened them. For dwellings priced between 1.5 billion and 2.5 billion won, the loan limit was cut to 400 million won, and for those over 2.5 billion won, to 200 million won. In addition, the entire city of Seoul and 12 areas in Gyeonggi were bound as permit and regulated zones, adding an owner-occupancy requirement while limiting the loan-to-value (LTV) ratio on mortgage loans to 40%.
During the Moon Jae-in administration, tough real estate measures also poured out from the first year. In 2017 alone, it announced four packages: the June 19 measures, the Aug. 2 measures, the Oct. 24 measures (comprehensive household debt measures), and the Dec. 13 measures (measures to vitalize rental housing). It designated areas subject to adjustment and speculation/overheating control zones and reduced LTV and the debt-to-income ratio (DTI). It also revived the reconstruction excess profit recapture system at that time.
Beyond that, the Moon Jae-in administration introduced a total of 28 real estate packages over its five-year term. As home prices failed to be contained despite tough early measures, it announced unprecedented loan restrictions through the Dec. 16, 2019 package, banning mortgage loans for apartments priced over 1.5 billion won. The fact that the June 27 and Oct. 15 packages set price caps for mortgage eligibility has been interpreted as the basis for criticism calling it "Moon Jae-in season 2."
There are clear differences. The Lee Jae-myung administration, seeking not to repeat past real estate policy failures, has from the outset rolled out measures comprehensively covering loans, subscriptions, and regulated areas. The loan cap that appeared in the third year of the Moon Jae-in administration came three months after inauguration. At the same time, supply measures arrived a step earlier. Through the Sept. 7 package, it said it would break ground on 1.35 million units in the greater Seoul area over the next five years, centered on public housing, and that the Korea Land & Housing Corporation (LH) would directly carry out housing construction projects. However, experts pointed out that the stronger the measures, the stronger the market backlash tends to be, and that public-centered housing supply proceeds slowly.
Citigroup, a global investment bank (IB), said the Oct. 15 package may have a short-term effect but predicted the upward trend in home prices would not be broken. Kim Jin-uk, Citigroup economist, said, "In the short term, it could help stabilize the rate of increase in dwelling prices, transactions, and the household debt growth rate in the greater Seoul area," but added, "Going forward, home prices in the greater Seoul area will remain elevated due to structural factors."
◆ As multi-homeowners are targeted, "one smart home" coalesces… "Han River belt to see concentrated gains"
Few experts believe real estate prices will be contained during the Lee Jae-myung administration's term. Most say backlash, as during the Moon Jae-in years, will instead enlarge the magnitude of gains. The government is mentioning "property tax" as a last card, but tougher property taxes in the past were among the main drivers of the "one smart home" phenomenon.
However, the pattern of increases is expected to differ. During the Moon Jae-in years, the pace of price gains spread toward the greater Seoul area and nationwide as the term progressed. Over the five years of the Moon administration, apartment prices in the capital region rose 97.84% cumulatively, and 81.28% nationwide. In particular, nationwide annual increases became markedly higher toward the latter half of the term. The nationwide annual apartment price increase stood at 6.41% in 2017, then 11.77% in 2018, 5.70% in 2019, 20.48% in 2020, and 19.59% in 2021.
If regulatory measures persist under the Lee Jae-myung administration, the view that apartment prices will surge in key Seoul areas, centered on the Han River belt, is gaining traction. In 2017, indiscriminate investing was rampant, and stricter regulations and taxes entrenched the "one smart home" trend. Recently, with new builds scarcer, a deepened preference for apartments, and tighter across-the-board regulation, the situation is somewhat different. In particular, under the Oct. 15 package, as rapidly rising areas including the three Gangnam districts and areas such as Geumcheon, Gangbuk, and Dobong were bound together as the same permit zones, analysis says the likelihood of funds concentrating in prime areas has increased further.
Yoon Ji-hae, senior researcher at Real Estate R114, said, "In the early Moon Jae-in years, whenever a regulated area was marked out against a backdrop of low-rate liquidity, that area rose. The range of rising areas then expanded," adding, "Now, regulations are too strong, and the 'one smart home' has already progressed significantly, so the preference for the asset class called apartments is extremely high."
Nam Hyeok-woo, a real estate researcher at Woori Bank's WM Sales Strategy Department, said, "With the Oct. 15 package applying the same triple regulation across all of Seoul and major areas of Gyeonggi, the effect of dispersing demand within Seoul could weaken," adding, "Going forward, the tendency for demand to converge on 'locations and products that are better, if possible' could strengthen again, so we need to watch."