Seoul Housing Prices Rise Despite Strict Loan Regulations as Property Shortage Intensifies

Paradoxical Effects of Loan Restrictions

Despite the South Korean government's strictest real estate loan regulations, Seoul apartment prices continue their upward trajectory. The combination of mortgage loan limits exceeding 600 million won and third-phase DSR (Debt Service Ratio) regulations has dramatically reduced transaction volumes, but paradoxically created upward pressure on housing prices due to property shortages.

Regulatory Measures and Market Response

The government's super-strong real estate measures announced on June 27th aimed to control housing prices in Seoul and the greater metropolitan area by limiting maximum mortgage loans to 600 million won. Combined with the implementation of third-phase DSR regulations, purchasing homes through loans has become significantly more difficult. However, these powerful regulations are producing paradoxical results. Despite property owners in Han River belt areas reducing asking prices by hundreds of millions of won, actually tradable properties are disappearing from the market. Only buyers with substantial purchasing power remain in the market, intensifying the property shortage phenomenon.

Sharp Decline in Seoul Apartment Listings

According to real estate information company Asil, Seoul apartment listings decreased from 82,636 properties on the 1st of last month to 75,536 properties on the 1st of this month, representing approximately an 8.6% decline within one month. This is analyzed as sellers withdrawing properties from the market as the pool of actual potential buyers shrinks due to loan regulations. The decline in available properties is particularly pronounced in high-priced apartment complexes along the Han River. Areas that previously saw active transactions now struggle to find properties available for actual trading.

Impact on Rental Markets

The strengthened loan regulations directly affect rental markets as well. Demand displaced from the buying market is expected to shift significantly toward rental housing, substantially increasing rental demand. Combined with reduced apartment supply, this creates upward pressure on rental prices. According to forecasts by Real Estate R114, next year's Seoul apartment move-in volume is expected to be only half of this year's amount. With supply shortages ahead of the autumn moving season, concerns about rental housing difficulties are being raised.

Presidential Policy Direction

President Lee Jae-myung has repeatedly expressed his intention to redirect capital from real estate to stock markets. The strategy involves maintaining promises not to control housing prices through taxation while stabilizing markets through loan regulations. The Democratic Party has also stated that reviewing real estate tax reforms is difficult at present. Instead, they maintain their policy of pursuing housing price stability through loan regulations and supply expansion.

Regional Impact Variations

While loan regulations target the metropolitan area, they also affect regional markets. In Jeonbuk province, price increases are occurring due to insufficient quality apartment supply and resolution of policy uncertainties from the previous government. However, unlike Seoul, regional areas face relatively less direct impact from the 600 million won limit restriction, showing different patterns by region. Metropolitan area regulations may even serve as positive factors for regional real estate markets.

Market Outlook and Concerns

Experts warn that current loan regulations may bring short-term transaction volume decreases, but medium to long-term price increase pressures from property shortages could be greater. Combined with supply cliffs, concerns about rapid housing price increases from next year could intensify. Additionally, increasing rental market instability could create problems for housing stability. Simultaneous instability in buying and rental markets could negatively impact the entire real estate market.

Need for Policy Effectiveness Review

Some quarters point out that current loan regulations may have missed their target. Rather than speculative demand, actual homebuyers are suffering greater impacts, with critics arguing that market distortions are intensifying rather than stabilization effects being achieved. Going forward, the government will need to carefully review the effectiveness of loan regulations and consider policy adjustments when necessary. Finding the balance between market stabilization and protecting genuine homebuyers remains an important challenge.

Long-term Implications

The current situation highlights the complexity of real estate policy implementation in South Korea's unique market conditions. As the government attempts to balance multiple objectives - price stability, market access, and housing security - the unintended consequences of well-intentioned regulations become apparent. Market observers suggest that sustainable solutions require comprehensive approaches addressing both supply and demand factors, rather than relying solely on financial restrictions that may create new forms of market inequality.

Original: https://trendy.storydot.kr/real-estate/seoul-housing-loan-regulation-effects