Seoul’s apartment market cools more ahead of Bank of Korea rate decision
SEOUL’S housing market showed more signs of cooling last month, with apartment prices and transactions continuing to slide, creating more favourable conditions for the Bank of Korea (BOK) to consider a policy pivot next week.
The number of trades dropped to 1,501 in September from 6,087 in August, marking the second month of declines, according to preliminary data seen on Tuesday (Oct 1) on the website of the Seoul city office. The average sales price also slipped to 1.1 billion won (S$1 billion) per unit from 1.2 billion won a month earlier in a third consecutive decline, the data showed.
While the number of transactions is likely to increase in the coming weeks as data get updated with purchases reported belatedly, the initial figures are still weaker than last month, indicating a cooling trend in South Korea’s most closely watched property market. The BOK has cited Seoul apartment prices as a key concern that discouraged authorities from conducting a policy pivot in recent months.
The central bank next sets policy on Oct 11. The board has kept the benchmark interest rate at 3.5 per cent since early 2023 and is currently scrutinising housing data to determine if growth in household loans will slow enough to ease concerns about potential financial imbalances.
South Koreans hold an overwhelming share of their wealth in residential properties and the hotter-than-expected rise in apartment prices upended expectations that the BOK would begin a policy pivot if inflation continued to trend lower towards its target of 2 per cent, as it did in August.
The overheating has prompted government authorities to tighten lending rules and announce a plan to address a shortage of housing supply after credit risks in the construction industry crimped activity. Last week, BOK board member Chang Yongsung flagged expectations that housing price growth would start to moderate due to those measures. Another member Shin Sung Hwan said the BOK could proceed with a pivot even without seeing definite signs of cooling in the housing market.
In separate data released by the Korea Real Estate Board in late September, apartment prices in the capital increased 0.12 per cent from a week earlier, marking the slowest pace of growth since early June. For the entire nation, price growth slowed to 0.04 per cent from 0.05 per cent.
“Several indicators show a cooldown of the Seoul apartment market since mid-August,” Citi Research economists Jiuk Choi and Jin-Wook Kim said on Friday. They expect the BOK to deliver a quarter-percentage-point rate cut next week. Still, they said authorities would likely retain some caution, given the supply of apartments may remain limited for a few more years. BLOOMBERG
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