The real estate market is difficult to read, and buying a home is equally challenging. Government policies are similarly complex. This is where the tough reality of real estate begins.
Seoul's renters are already worrying about the upcoming fall moving season due to a decrease in new apartment availability. While the government and the Seoul city government discuss accelerating supply, tenants and prospective buyers are focused on immediate realities, not plans for years down the line. The market reacts more quickly to actual apartment availability than to announcements.
Numerous policies have been implemented to suppress demand, including tightening loans, increasing taxes, and regulating transactions, which temporarily stalls the market. However, if the belief spreads that there is a shortage of homes, the situation changes. This is especially true in the rental market, where the urgency to find housing cannot be postponed as easily as buying a home. Rental prices are the first indicators of the supply shortage felt in the market.
According to Zigbang, the expected number of new apartments in Seoul this year is 16,412 units, a 48% decrease from last year, effectively halving the supply. The bigger issue is that this trend is not expected to end this year. The number of new apartments in Seoul is likely to remain significantly below the long-term average in the coming years. The uncertainty about future availability is more concerning than this year's decline.
New apartments won't fill the gaps in supply
Of course, there are new apartment complexes opening in Seoul this year. Some large complexes set to open in the second half of the year could provide a buffer for the fall rental market. As new apartments become available, rental listings will increase to accommodate those moving from existing homes. A higher number of new apartments can ease pressure not only on new rentals but also on existing rental properties in the vicinity.
However, the opening of large complexes does not guarantee stability for the entire rental market in Seoul. The impact of new apartments varies by region and price range. Many units in redevelopment projects are occupied by members of the cooperative, meaning the total number of rental units released may not match the total number of apartments. Rental demand in Seoul fluctuates based on region and price range. Newly built rental units in Gangnam cannot absorb the demand across all areas of Seoul.
Thus, the upcoming fall rental season is not just a seasonal event. While the new apartments may provide some relief, whether that effect will be evenly distributed across Seoul remains uncertain. Fall is a peak time for lease renewals and moving, concentrating tenant choices. Coupled with concerns about future shortages, the rental market may reflect not just seasonal demand but also a signal of supply anxiety.
Indeed, the rental market is already showing signs of instability. Rental prices for apartments in Seoul have been rising for some time, with recent increases becoming more pronounced. The number of rental listings is decreasing, and the trend of shifting to monthly rentals is gaining momentum. Renters must now consider whether to gather more deposit money, accept the burden of monthly rent, or move to the outskirts. For young people and newlyweds, the choice of residence and the timing of purchasing their first home are both in flux.
Rental crisis spills into buying sentiment
At this point, some demand shifts toward purchasing homes. As the costs of renewing rental agreements rise, the mindset of potential buyers changes. The thought of “let’s wait a bit longer” shifts to “let’s buy instead.” Homeowners also reconsider their calculations; as rental prices increase, their holding costs decrease, reducing the urgency to sell. While a rental crisis does not directly lead to rising home prices, it certainly creates pressure that can simultaneously drive buyers to purchase and restrict available listings. Ultimately, the decrease in new apartment supply can serve as an early warning signal that influences buying sentiment through the rental market. As the scarcity of new builds increases, this pressure can extend to existing rental units.
A race to accelerate supply is necessary. Speeding up redevelopment and reconstruction permits, reducing project timelines, and increasing construction must not be delayed. However, even with a race for speed, time is still required. Even if permits are expedited, the effects will not directly translate into new apartments available by next fall. The number of new apartments this year and next is a result of permits and construction from previous years, not current policies.
Recently, some indicators of permit approvals have shown positive signs. However, in cumulative terms, the number of new apartment constructions and permits in Seoul remains weak. For the government to effectively discuss expanding supply, mere announcements of thousands of new units are insufficient. It must detail which regions will see which projects start construction and when they will be available. The credibility of supply policies ultimately stems from execution timelines, not just announcements.
This fall, the rental market in Seoul is likely to serve as a barometer for housing prices in the second half of the year. More precisely, it will be a time when the credibility of supply policies is tested in the market. If rental prices stabilize, the market may temporarily regain confidence in supply. Conversely, if the influx of new apartments fails to alleviate rental anxieties, the supply shortage will shift from a forecast to a price expectation. If that expectation transfers to the buying market, reversing the trend through regulation alone will be challenging.
Seoul's housing prices do not move solely based on government intentions. Buyers will consider whether enough homes will be available, whether they can find rentals, and whether they can wait without purchasing now. The halving of new apartment supply is significant for these reasons. It signifies not just a shortage of new apartments this year but also a trust issue regarding supply that can disrupt both the rental market and buying sentiment.
What is needed now is not another supply announcement but a credible schedule of upcoming apartment openings. To effectively address the supply crisis, we must first confront the reality of the impending shortage.
* This article has been translated by AI.
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