If the city of Seoul proceeds with plans to start construction on 310,000 housing units by 2031 through redevelopment projects, surrounding rental prices could rise by as much as 5% in the short term due to relocation demand. However, in the long term, the increase in housing supply may lead to price stabilization, according to an analysis.
Professor Kim Jeong-seop of the Ulsan National Institute of Science and Technology (UNIST) presented these findings on October 13 during a roundtable discussion hosted by the Korean Urban Real Estate Society at the Seoul Gallery workshop room. His topic was "Does Relocation from Redevelopment Projects Increase Surrounding Housing Prices?"
Based on Seoul's plan to start construction on 310,000 units by 2031, Professor Kim simulated the impact of relocation demand. He estimated that, excluding this year's 30,000 units, the remaining 280,000 units would be evenly distributed between 2027 and 2031, with approximately 76% of the new supply replacing demolished existing homes. This leads to an estimated annual demolition rate of about 42,000 units.
When compared to the average annual rental transaction volume of about 640,000 over the past three years in Seoul, the additional relocation demand would represent approximately 6.6% of existing transactions. Applying price elasticity derived from previous studies, the short-term price increase was estimated to be between 1.4% and 5%.
Professor Kim explained that the price changes resulting from redevelopment projects may only lead to short-term increases. As existing homes are demolished, the housing stock decreases while relocation demand increases, creating upward pressure on rents. However, once the projects are completed and housing supply increases, the stock will rise and relocation demand will decrease, leading to price stabilization.
He noted, "The impact of rent increases due to relocation and demolition is likely to be concentrated in nearby areas during peak relocation periods. However, before and after project completion, the stabilization effect on housing prices due to the supply of redeveloped homes can also be observed."
Meanwhile, discussions at the roundtable also addressed relocation measures and the pace of redevelopment projects. Professor Park Dong-ha of Konkuk University suggested that the scope of relocation should be expanded to include not only Seoul but also adjacent metropolitan areas. Professor Jeong Jae-hoon of Dankook University pointed out the risks of slowing down redevelopment, stating that delays could exacerbate the scarcity of new apartments in Seoul, driving up prices. Professor Kim Jun-hyung of Myongji University emphasized the need to evaluate existing relocation measures in Seoul and consider the necessity of a central government-level response.
* This article has been translated by AI.
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