Outer Seoul Surges Even as Gangnam Falls—Why?

An unusual pattern is emerging, with a Gangnam decline and an outer-Seoul rise occurring together, shaking conventional real estate logic.

Even as ultra-high-priced homes in Gangnam have recently declined, housing prices in outlying areas have risen in an unusual pattern that departs from existing theory.

This suggests that, due to the severe supply shortage in the Seoul area, it is difficult to stabilize Seoul home prices in the short term.

The decline in Gangnam home prices is mainly attributed to differentiated tax policy on ultra-high-priced homes and rising holding-tax burdens.

By contrast, the rise in outer-area prices is analyzed as the result of high mortgage availability for homes priced at 1.5 billion won or less, combined with rental demand.

Mango Ssam explained, "Don't loans come out most for 1.5 billion won and below? ... The 1.5 billion won and below, where you can make maximum use of mortgage loans, rises the most, and there's an effect that also pushes up the 1.5 to 2 billion won range together."

The fundamental cause of this phenomenon is pinpointed as the severe housing supply shortage in the Seoul area.

This is interpreted as an upward leveling phenomenon, in which, despite partial declines in Gangnam, prices in outlying areas rise together, lifting the overall waterline of housing prices.

The expert points out that prices cannot be brought down through artificial policy alone without addressing the supply shortage.

The adjustment period in the Gangnam housing market, which used to last more than six months, has recently shortened to one or two months.

An analysis holds that over the past 20 years, Gangnam's distressed listings were released onto the market, so most of those who wanted to sell have already sold.

This lends weight to the view that rising Gangnam prices do not drive the overall market upward; rather, the supply shortage relative to demand is the fundamental problem in the Seoul real estate market.

This would mark the lowest level in history for Seoul apartment move-ins, which have never dropped below 10,000 units since 1982.

Seoul's 10-year average move-in supply is about 35,000 units per year, so the currently projected volume falls far short.

The shortage of move-in supply in Seoul is expected to persist through 2029.

Because it takes about four years from housing construction start to actual move-in, a severe supply shortage is likely to continue until 2030 as well.

This decline in move-in supply is already translating into the highest level of housing price increases.

The analysis holds that, within the range of typical market forecasts, the probability of Seoul home prices falling is low.

It is forecast that this phenomenon will spread beyond Seoul to major regional cities starting next year.

Rate hikes can be divided into 'good rate hikes' and 'bad rate hikes' depending on economic strength, and when economic strength is weak, periods of high rates have led to economic crises.

Analyzing economic crisis cases such as the IMF crisis (1998), the financial crisis (2008), and COVID-19 (2022), housing market crash risk tended to rise when the gap between growth rate and benchmark interest rate exceeded 4.5%.

Given that South Korea's nominal growth rate is currently about 20% and the benchmark rate is 3.5%, the current interest rate level is judged to be manageable.

Reinvestment by large conglomerates such as Samsung Electronics and SK Hynix flows funds into related small and mid-sized companies, and these funds eventually seep into the overall market with a time lag.

Money that does not sit idle in household savings ultimately affects the broader economy, including the real estate market.

The fact that Seoul's apartment penetration rate remains in the low 40% range could amplify the impact of such capital inflows on the housing market.

Seoul's actual apartment supply is far smaller than the total of multi-family housing, and Mango Ssam asserted, "In the end, Seoul has no apartments. That is the fact."

With annual transactions under 5% of the total stock, a handful of deals set prices, and transaction statistics that include officetel-type housing can produce an illusion.

The government has made public data more accessible, but there is no expertise or standard for analyzing it, so experts tend to offer emotionally driven analysis rather than data-based analysis.

The supply shortage is expected to take at least five years to resolve. Supply in regional areas has already fallen significantly.

The key variable that would trigger a decline in home prices is an economic crisis, which is unpredictable. Unless an economic crisis occurs, home prices are unlikely to fall.

For homes meant for long-term residence, it is important to carefully assess whether prices have recovered to their previous peak before choosing.

It is important to pursue excess returns above inflation to reduce relative deprivation, and for long-term residence, the possibility of redevelopment and reconstruction should also be considered.

Seoul areas have shown price volatility, repeatedly rising by 1 billion won and then falling by 200 million won.

Polarization is now clear, with some areas having already recovered their prior peaks and entered a new uptrend, while others remain short of recovering their previous highs.

As a result, residential demand is being pushed out to outer Seoul areas such as Bucheon and Ilsan.

For those planning to move every two years in the short term, a strategy of trading up to areas with good returns and high transaction turnover is effective.

For long-term residence, it is better to choose apartments with redevelopment or reconstruction potential, and rather than abstract deliberation over location, the relative growth rate of asset value should be considered.

Home prices near both sides of a subway station tend to rise together, so the focus should be on the best possible choice within one's available budget.

The expert emphasized that steady learning and long-term planning, rather than short-term investment skill, ultimately determine lasting wealth.

The expert recommends making decisions within the scope one can realistically handle now, rather than comparing oneself to others.