Stabilizing Korea’s real estate market requires policy coordination and long-term vision
Published: 22 May. 2025, 00:04
Park Tae-won
The author is a professor of urban planning and real estate at Kwangwoon University and a president of the Korean Institute of Urban Design
It has been two months since the Seoul Metropolitan Government reintroduced land transaction permit zones after lifting them in February. The rollback initially sparked optimism, but the resulting surge in transactions and rapid price hikes led to renewed concerns about market instability. On March 24, the city reversed course, not only reinstating the zones but expanding them.
![Apartment buildings in Apgujeong, Gangnam District, southern Seoul, are pictured in this photo taken May 7. [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2025/05/22/8b7183e0-b51a-4f3b-b3d6-fa97545a07b0.jpg)
Apartment buildings in Apgujeong, Gangnam District, southern Seoul, are pictured in this photo taken May 7. [YONHAP]
Since then, housing markets in key districts — Gangnam, Seocho, Songpa and Yongsan — have exhibited instability. Transactions remain scarce, but prices have continued to reach record highs. These trends reflect weakened trust in government policy and inflated expectations of further price increases. As a result, the original policy goal — protecting genuine homebuyers and stabilizing the market — has grown more elusive.
This episode underscores the sensitivity of Korea’s real estate market to government policy shifts. Beyond administrative actions, the market has been grappling with structural challenges, including defaults in project finance (PF) for real estate and soaring construction costs. Concerns are rising that supply constraints could worsen price instability.
Toward the end of last year, political risk stemming from the Dec. 3 martial law declaration further rattled the market. Since then, political tensions have eased and an early presidential election has been scheduled for June 3. Discussions around future real estate policy are gaining momentum.
As the incoming administration prepares to take office, several principles should guide its housing strategy.
First, housing policy should be grounded in local conditions while being aligned with central government initiatives for broader market stability. Taxation and financial regulations — core instruments of real estate policy — fall under the central government and carry nationwide implications. Effective coordination between municipal authorities and central regulators, such as financial oversight bodies, is essential.
Second, while expanding supply to meet demand is critical, a multidimensional approach is needed. Creating designated zones in Seoul to disperse demand — through specialized districts themed around education, transit, corporate hubs, or landmark developments — can relieve pressure on high-demand areas. In light of delays in third-phase new town developments, moving prematurely to a fourth-phase strategy risks repeating quantity-driven policies without addressing structural inefficiencies.
Third, urban redevelopment and the revitalization of aging residential areas must continue, but with greater sensitivity to long-term urban structure. While incentives like floor area ratio bonuses can enhance project feasibility, updated guidelines and calibrated pacing are needed to avoid overdevelopment. Even setting aside equity concerns, excessive supply could generate unintended social and economic consequences in the long run.
Fourth, reforms to the real estate project finance system are urgently required. A modernized framework should include mechanisms to screen out risky projects and promote financially sound ones. Adjusting risk-weight parameters by financial sector could help stabilize the lending landscape.
Fifth, real estate and construction policies must be integrated with forward-looking urban design strategies. Housing policy should not focus solely on supply volume but aim to create viable living environments. The government should promote 15-minute compact urban zones focused on walkability and cycling, develop long-life and modular housing using new technologies, and expand support for multi-habitation lifestyles and four-day work weeks.
Housing design must evolve to reflect changing lifestyles and preferences across age groups and social segments. Urban design should emphasize collective identity, tailored spaces and long-term functionality. Embracing new models of place-making can help address both housing supply and social cohesion.
![Apartment complexes in Seoul as seen from Namsan in central on April 28 [YONHAP]](https://koreajoongangdaily.joins.com/data/photo/2025/05/22/6a5d9582-4d79-473b-a71d-6b7ef7bfba3f.jpg)
Apartment complexes in Seoul as seen from Namsan in central on April 28 [YONHAP]
The deepening polarization in the housing market has created a paradox: even major cities are seeing an uptick in vacant homes, while supply shortages persist. In contrast, mid-sized regional cities face rising unsold inventories due to population decline, reinforcing the migration of younger generations toward the greater Seoul area.
The central challenge of real estate policy is not merely market control, but building consistent strategies that protect end users and foster long-term stability. As such, the next administration must design a dual-track approach — addressing the powerful ripple effect of the capital region while developing regional housing policies that align with long-term demographic and economic trends.
A future-oriented housing policy must go beyond short-term supply targets. It should anticipate evolving demand for livable spaces and integrate experimental, innovative planning principles. A national policy shift that balances economic logic with social consensus is vital. Without it, efforts to stabilize the real estate market will likely falter under the weight of unresolved structural pressures.
Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
with the Korea JoongAng Daily
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