Seoul apartment prices rise further even as President Lee hardens resolve

[SEOUL] Seoul apartment prices extended a rally that is testing the government’s efforts to curb speculative buying and sharpening President Lee Jae Myung’s criticism of those who own more than one home.

Prices in the capital climbed 0.27 per cent in the week ended Feb 2, according to data released Thursday by Korea Real Estate Board (KREB), marking the 53rd straight weekly increase. Gains slowed a tad from 0.31 per cent in the previous week.

The unbroken run of increases underscores how resilient demand has remained despite repeated government interventions and Lee’s warning, including his caution against extending favourable tax treatment for property sales.

KREB said that prices are trending upward across Seoul, driven by sustained demand centred on newly constructed, large-scale residential complexes in areas with favourable living conditions and convenient access to subway stations, with transactions increasingly taking place at higher price levels.

Apartment prices nationwide showed a moderate 0.09 per cent rise, the data showed. That divergence has become central to the policy debate and is beginning to swing public opinion against Lee and his housing strategy.

Distorted incentives

In a series of social media posts over recent weeks, the president has argued that rising apartment prices reflect distorted incentives rather than genuine housing needs.

This week, Lee sharpened his attack and issued a last warning to multiple homeowners to sell while vowing to take all possible steps to bring prices under control. The current property market rally is reminiscent of a record 85-week streak of gains for Seoul’s apartment prices between June 2020 and January 2022.

Still, Lee’s hardening messages have taken on added significance ahead of a May 9 deadline, when a temporary capital gains tax exemption on home sales is set to expire. Introduced to encourage transactions and ease supply bottlenecks, the exemption has allowed owners of multiple homes to sell without facing steeper tax penalties.

Lee has ruled out extending the measure, signalling that tolerating lower taxes for additional properties now runs counter to his broader effort to cool speculation.

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The approaching cut-off is creating conflicting pressures in the market. Some investors are rushing to sell before higher taxes apply, while others are delaying decisions amid uncertainty over enforcement and the risk of further policy tightening.

Rather than easing supply in a durable way, analysts say the deadline may amplify short-term volatility without addressing the structural shortages that continue to push prices higher in Seoul.

The central bank is watching closely. The Bank of Korea has kept its benchmark rate at 2.5 per cent of late as authorities stay wary of stoking more borrowing at a time when housing prices in the capital continue to climb.

Officials have repeatedly flagged Seoul real estate as a risk to financial stability, particularly given the concentration of mortgage debt among higher-income borrowers. BLOOMBERG