An analysis found that interest rates and liquidity have been the key factors affecting dwelling sales prices in the greater Seoul area over the past 20 years.
On Jan. 4, the Korea Housing Institute derived, using correlation coefficients, the factors that affect dwelling sales prices from 2005 through last year: liquidity (M2 money supply), supply and demand, interest rates, and the economy, in that order. Specifically, liquidity 0.50, supply and demand (supply shortage) 0.38, interest rates -0.35, and economic growth rate 0.15.
When limited to the greater Seoul area, the impact factors were found to be interest rates -0.55, liquidity 0.54, supply and demand 0.34, and economic growth rate 0.14.
The institute said, "In the greater Seoul area, the influence of interest rates and liquidity is greater than in the provinces," adding, "Because home prices in the greater Seoul area are relatively high and there are many salaried workers, the reliance on financial institution loans when buying dwellings is higher."
The factors affecting home prices varied by period. From 2005 to 2014, over 10 years, the factors affecting home prices were liquidity 0.39, supply and demand 0.32, and interest rates and economic growth rate each 0.12, with the influence of interest rates relatively limited.
However, between 2015 and 2024, liquidity was 0.62, interest rates -0.57, supply and demand 0.47, and economic growth rate 0.17, with the influence of interest rates about five times higher than in the previous decade. The institute analyzed that this appears to be because the share of purchasing one's home through a mortgage loan rose sharply over the past 10 years.
A Korea Housing Institute official said, "Judging from the analysis of factors affecting dwelling prices, achieving supply-demand balance is the most important in the mid to long term to stabilize prices, but in the short term it is also necessary to manage liquidity and interest rates appropriately."