South Korea’s property market rally clouds case for central bank rate cut
Some deals have been done at prices exceeding current market values
[SEOUL] South Korea’s property market extended its rally to a 35th week, with price gains accelerating despite government measures to cool demand – complicating the case for the central bank to cut borrowing costs to support the economy.
Apartment prices in Seoul rose 0.27 per cent in the week ended Sep 29, compared with a 0.19 per cent increase in the previous week, Korea Real Estate Board data showed on Thursday (Oct 2).
The advance marked the steepest weekly rise since early July, when prices climbed 0.29 per cent.
The data underscore resilient demand despite tighter mortgage restrictions. Inquiries have been rising at redevelopment sites with strong appreciation potential, as well as in large complexes and neighbourhoods near subway stations, according to the board.
Some deals have been done at prices exceeding current market values, adding to the upward momentum.
The rally poses a challenge for the Bank of Korea (BOK), which has flagged financial stability risks tied to real estate while keeping its policy rate on hold in recent months.
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Broader economic pressures are also mounting. Exports slipped in September, adding to evidence of a slowdown as the nation grapples with US tariffs.
Under a trade deal reached in July, the US imposed 15 per cent levies on imports of Korean goods. Talks remain stalled over Seoul’s US$350 billion investment pledge and other proposals such as a currency swap arrangement.
At its last meeting on Aug 28, five of six board members said they were open to a rate cut within three months. Officials have indicated that the Federal Reserve’s easing would provide more room to focus on growth. The BOK next sets policy on Oct 23.
Board member Hwang Kunil said last week he remained undecided on whether to push for action this month, noting the central bank’s concern is less about home values than the debt linked to them.
The BOK has cut rates four times since October 2024, but paused at its last two meetings to weigh the risks from rising household debt and persistent property gains in Greater Seoul.
President Lee Jae-myung’s administration has tightened rules on the housing market that included mortgage caps in the capital region and restrictions on foreign buyers. Still, prices have continued to climb, raising questions about the effectiveness of policy curbs.
The government projects growth this year will be the weakest since the pandemic-driven contraction of 2020.
The BOK has warned that tariffs, industrial weakness and housing imbalances could undermine financial stability, saying that while debt growth has slowed, price expectations in Seoul remain elevated.
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