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In the early days of the new administration, South Korea's housing market is heating up. According to weekly market data, Seoul home prices rose 0.36% in the third week of June, marking the fastest pace since the downturn in the second half of 2022. Unlike the earlier rally following the February lifting and reimposition of the land transaction permit system, nearly all of Seoul’s 23 districts—except for Nowon, Dobong, Jungnang, Guro, and Geumcheon—are now experiencing a robust uptrend.
Typically, the market is segmented into five price quintiles, with the top quintile (5th) representing the highest-priced properties and the 1st quintile the lowest. Currently, Seoul’s 5th quintile is seeing gains of around 0.7%, the 4th quintile between 0.4% and 0.7%, and the 3rd quintile between 0.2% and 0.4%, all indicating strong upward momentum. In Gyeonggi Province, high-end areas such as Gwacheon, Bundang, and Pangyo—classified as the 5th quintile—are rising by about 0.4%. For now, only these top-tier regions are showing strength, and the market is closely watching whether this trend will spread to lower-priced segments.
With less than a month since the inauguration of the Lee Jae-myung administration, the government appears to view the current housing surge as a delayed aftershock from the earlier changes to the land transaction permit system. There is a strong possibility that areas like Mapo, Seongdong, and Gwacheon could be newly designated under the system. The sense of urgency among buyers—fueled by fears that opportunities to purchase may soon close—has led to concentrated demand and price spikes, a pattern seen in previous bull markets.
It is expected to take considerable time before the Lee administration unveils its real estate policy. Under the previous Moon Jae-in government, it took more than two months to finalize key appointments, and a similar timeline is anticipated now. The Ministry of Economy and Finance and the Financial Services Commission (FSC) oversee demand-side policy, while the Ministry of Land, Infrastructure and Transport (MOLIT) handles supply. Potential restructuring of the finance-related ministries could further delay policy responses. While MOLIT may be able to move faster, changes in the finance ministries could take longer, raising concerns that any delay in policy rollout could fuel further market overheating.
Historically, transitions between administrations have often led to policy missteps in the real estate market. For example, during the handover from the Kim Dae-jung to Roh Moo-hyun administrations, the latter failed to manage the liquidity unleashed by its predecessor, resulting in the 2003 credit card crisis and a sustained rise in household debt and housing prices. Similarly, the Moon administration was criticized for its slow response to the Park Geun-hye government’s expansionary lending policies and the suspension of new town developments, leading to a failure to stabilize the market.
The current transition from the Yoon Suk Yeol to Lee Jae-myung administrations carries similar risks. Some experts advocate for a cautious approach, suggesting that hasty policy moves could backfire even amid market overheating.
However, housing prices are directly tied to living costs and inflation, making them a critical factor for public welfare. Failure to implement timely measures during a price surge is tantamount to losing control over inflation.
If the Lee administration intends to restructure the Ministry of Economy and Finance or the FSC, it may be difficult for officials to focus on demand management. In this context, leveraging the Bank of Korea (BOK) to implement demand-side policies could be an effective interim solution. The BOK’s inflation target includes housing market stability, and as long as the BOK governor remains in place, policy continuity can be ensured. Given the BOK’s independence and readiness, empowering the central bank to manage housing demand until the new administration is fully staffed could help stabilize living costs.
A similar housing rally occurred from June to August 2024. At that time, a surge in demand for small apartments—driven by a wave of tenants fleeing the so-called “jeonse fraud” in the villa market—pushed up rental prices, which in turn lifted apartment prices in a stepwise fashion. The government responded with the August 8 measures, including an unlimited villa purchase program, and finance ministries introduced demand-suppression policies. As a result, the market stabilized from September 2024.
Ultimately, the timeliness of supply and demand measures is crucial. The current rally in May–June 2025 is sharper and broader than in 2024, warranting active intervention. The market has already entered an overheated phase, with consumer sentiment surveys showing expectations approaching 2021 levels. Empirical studies by the BOK indicate that sentiment indices lead actual housing market movements by four to eight months. Thus, with sentiment turning in May–June, proactive management of the real estate market is needed for the second half of the year. In this context, empowering the BOK to manage demand is essential until the new administration’s appointments are finalized.
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(Cha Sang-wook, CEO of Connected Ground)
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