Seoul housing market sees price surge amid supply shortages and tax reforms

Seoul's real estate market is experiencing significant shifts driven by rising prices, decreasing new supply, and upcoming tax reforms. In June, Seoul apartment prices surged by 2.5%, the largest monthly increase in five years. This rise has led to a growing interest in mid-to-small sized housing as buyers seek more affordable options amidst high total costs.

Supply concerns are mounting as new apartment completions in Seoul are projected to decrease significantly, with estimates suggesting a drop to around 13,000 units by 2028. Additionally, recent data shows a decline in apartment construction starts. This scarcity is driving demand toward smaller units, particularly those near subway stations.

The government's proposed 2026 tax reform is also influencing market behavior. The plan aims to adjust the comprehensive real estate tax for high-value, non-resident, and multi-homeowners. This has led investors to compare the long-term holding costs of different property types. For instance, high-end residential officetels may offer significantly lower annual property taxes compared to apartments of similar market value due to different valuation methods.

While high-end districts like Gangnam and Seocho have seen some price corrections due to anticipated tax increases, mid-to-low priced areas in the outskirts are seeing increased activity. Meanwhile, the rising cost of villas (low-rise housing) is making it difficult for young buyers to utilize government-backed loans that are capped at 400 million won, as many villas in central areas now exceed this threshold.