In the Seoul housing market, indicators predicting future supply have declined, while demand for home purchases is on the rise, creating a notable mismatch. Concerns are growing that the decrease in available housing could lead to long-term supply issues, as current demand for purchases is increasing despite rising home prices.
According to housing statistics from the Ministry of Land, Infrastructure and Transport, the number of housing permits in Seoul from January to May this year was 19,052 units, a 1.4% decrease compared to the same period last year. Permits are considered a leading indicator of future supply, occurring before actual construction begins.
The number of housing starts has seen a more significant decline. During the same period, housing starts in Seoul totaled 9,630 units, down 10.7% from the previous year. Among these, apartment construction fell to 6,615 units, a 25.3% decrease, more than double the decline of overall housing starts.
The number of completed units, which indicates immediate availability, has also sharply decreased. From January to May this year, housing completions in Seoul were 13,111 units, a 41.6% drop compared to the same period last year. Apartment completions were 10,690 units, down 48.4%, effectively halving the previous year's figures.
All stages of the supply process—permits, starts, and completions—are simultaneously contracting. A reduction in permits leads to fewer new projects, and a decrease in starts will result in a reduction of completions and available units in the coming years. Given the current sharp decline in completions, a slow recovery in starts could make it difficult to resolve the supply shortage in Seoul in the short term.
In contrast, housing transactions have increased. From January to May this year, the volume of housing sales in Seoul reached 56,938 transactions, a 17.7% increase compared to the same period last year. This trend is in stark contrast to the declining supply indicators.
Recent months have seen an even stronger buying trend. In May, housing transactions in Seoul totaled 14,145, an 11.0% increase from the previous month. Among these, apartment transactions rose to 8,946, an 18.9% increase in just one month, indicating a recovery centered around apartments.
The gap between recovering demand and decreasing supply is also reflected in prices. According to the Korea Real Estate Agency's June national housing price trend survey, the average sale price of apartments in Seoul rose by 1.21% compared to the previous month. The price increases have spread beyond the northern districts, such as Seongbuk-gu, Gwangjin-gu, and Dongdaemun-gu, to areas with relatively lower-priced housing, including Guro-gu and Gangseo-gu.
The increase in rental prices has outpaced that of sale prices. In June, the average rent for apartments in Seoul rose by 1.37% from the previous month, exceeding the sale price increase by 0.16 percentage points. The monthly increase in rental prices rose from 1.15% in May to 1.37% in June.
Concerns about supply shortages are likely to first materialize in the rental market. As the number of available units decreases, the supply of rental properties entering the market will also decline. In areas with high demand for new rental properties, such as those undergoing redevelopment or where newlyweds and families with children are concentrated, competition among tenants may intensify. If rental prices continue to rise, some tenants unable to bear the burden of increased deposits may shift to purchasing lower-priced homes, further stimulating demand in the sales market.
A real estate industry insider stated, “The uncertainties in the Seoul housing market are not limited to the current price increases. While more people are looking to buy homes now, the number of new homes expected to enter the market in 2 to 3 years is decreasing.” He added, “If the increase in transactions continues alongside a decrease in construction starts, the potential for long-term market instability due to difficulties in moving in, rental shortages, and the scarcity of new apartments is likely to grow.”
* This article has been translated by AI.
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