Cooling in Seoul’s apartment market pauses ahead of BOK meeting

THE trend towards slower growth in prices for apartments in Seoul has paused so far in October, underscoring the difficulty of taming demand for top real estate assets and complicating the case for a pivot as the Bank of Korea (BOK) prepares to set policy on Friday (11 Oct).

Apartment prices in the South Korean capital rose 0.1 per cent in the first week of October from the previous seven-day period, the Korea Real Estate Board said on Thursday, a day before the central bank convenes to decide on its benchmark interest rate.

The growth matched the pace reported a week earlier, snapping a streak of moderating results that began in mid-September.

Apartments are the most sought-after type of housing in South Korea, and purchases of them contribute heavily to the nation’s household debt tallies. After consumer inflation cooled in recent months, trends in housing prices have become the central bank’s primary focus, as authorities weigh the timing of a potential rate cut.

Government officials have tightened mortgage lending, in a step that would discourage purchases, and promised to boost supply, in measures meant to nudge the BOK towards policy easing.

Monthly transactions of Seoul apartments have decreased since the introduction of the government’s policies. Those figures may be given more weight in deliberations by board members than the more volatile week-on-week data.

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Consumer inflation that has dipped below the BOK target of 2 per cent also helps increase the likelihood of a rate cut this week, rather than in November.

Twenty of 22 economists polled by Bloomberg before Thursday’s data said they expect the BOK to execute a quarter-percentage-point cut this week. About two-thirds of bond-market participants separately surveyed by the local Korean Financial Investment Association projected a cut, a smaller proportion that suggests greater caution over property markets.

A breakdown of the weekly housing data showed some upper-middle-class neighbourhoods, such as the Gangnam district, saw a pickup in prices, defying the government’s efforts to rein in the Seoul market. For the nation as a whole, apartment prices rose 0.01 per cent, a slower pace than the 0.02 per cent of the previous week, the high-frequency data showed. BLOOMBERG