Cautious experts shift stance as housing market heats up

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Cautious experts shift stance as housing market heats up

Published: 19 Jun. 2025, 00:02

Audio report: written by reporters, read by AI

Sohn Hae-yong

The author is the business news editor of the JoongAng Ilbo.

One of Korea’s most cautious voices on real estate, Chae Sang-wook, CEO of Connected Ground and a former market analyst, has surprised the industry by reversing his outlook. For years, Chae maintained that Korea’s housing market faced structural decline due to low birthrates and aging demographics. But in a recent Facebook post, he declared a shift: “This is a bull market, and it’s better to treat it as the default. I’m changing my view to bullish for now and will watch how policy evolves.”

Apartment complexes in Seongbuk District, central Seoul, and Nowon District, northern Seoul, are pictured from Mount Namsan in central Seoul on June 10. [YONHAP]

Chae predicted that housing prices will rise not only in Seoul, but across the greater capital region in the latter half of the year — unless a major and unexpected policy shock suppresses demand. His remarks triggered backlash online, particularly on his YouTube channel, where subscribers criticized him for flip-flopping. Yet the market trend seems to be moving in line with his new perspective.

Online housing communities have seen a surge in anxiety, with users expressing fear of becoming “asset-poor overnight,” as in 2021, and voicing panic over not buying fast enough. Rumors of record-setting transactions, such as 2.95 billion won ($2.15 million) for a 25-pyeong (890-square-foot) unit in Jamsil, southern Seoul, and 7.2 billion won for a 30-pyeong apartment in Apgujeong-dong, Gangnam District, southern Seoul, have heightened a sense of exclusion among younger buyers and middle-income earners.

There are ample reasons for concern. Housing supply in Seoul remains structurally tight. Next year, only 24,462 units are scheduled for completion — half this year's number. Of particular note is that just three large apartment complexes with more than 1,000 units will be available, down from 11 this year and less than one-third of this year’s supply.

Meanwhile, expectations of increased liquidity are growing. The Lee Jae Myung administration is planning a supplementary budget of more than 20 trillion won, and the Bank of Korea (BOK) is signaling possible rate cuts. The combination may inject more cash into the property market, fueling further price hikes. Lee has made few direct statements about housing prices, which adds to market uncertainty. Real estate analyst Kim In-man told the JoongAng Ilbo, “The Seoul market is already in panic. There’s no faith in supply measures, taxes are expected to remain low, and rate cuts are likely, so prices are bound to rise.”

As prices climb, analysts say the administration faces its first real policy test. If left unchecked, the price surge could inflate household debt, dampen consumption and strain the domestic economy. The effects may ripple into broader social issues, worsening inequality and lowering work incentives. If the market veers into a full-blown bubble, it could undermine the administration’s political base.

But curbing housing prices is a long-term challenge. The Lee administration, unlike past progressive governments, aims to stabilize prices through expanded supply rather than strict regulation. Yet housing projects take years to deliver. Even priority redevelopment projects in first-generation satellite cities are unlikely to be completed before 2030. Introducing tougher regulations or taxes could also be counterproductive, given the public’s perception — shaped during the Roh Moo-hyun and Moon Jae-in administrations — that progressive governments tend to drive up home prices through aggressive oversight.

The government has said it will consider “all available policy tools” to respond to the recent price increase. But such routine declarations are unlikely to calm the market on their own.

Most experts agree that expectations — not just prices — must be managed. According to KB Kookmin Bank, Seoul’s buyer sentiment index rose to 82.98 on June 9, its highest level since October 2021 when the market was peaking. A recent BOK report warned that rising expectations are strongly correlated with actual price increases roughly eight months later. “Once formed, housing price expectations are difficult to reverse,” the report noted, emphasizing the importance of steady policy messaging. In real estate, as the saying goes, psychology is everything.

Apartment complexes near Jamsil, southern Seoul, are pictured from Namhansanseong in Gwangju, Gyeonggi, in mid-March. [YONHAP]

To rein in expectations, the government needs a clear road map for supply. This includes specific plans and timelines for accelerating redevelopment of first- and second-generation satellite cities, and construction in third-generation new towns — initiatives that were outlined in Lee’s campaign pledges. Even if immediate expansion is impossible, signaling a firm commitment to future supply could ease market anxiety.

In the short term, the government should also consider revising outdated or overly broad regulatory zones and enhancing debt-control measures such as debt service and loan-to-value ratios. This would help cool the “debt-fueled buying” trend, especially as interest rates decline and borrowing becomes cheaper.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.