South Korea's Residential Property Market Analysis 2025

Amid the heightened economic uncertainties, the South Korean housing market remains highly polarized, with the growth of sales prices and rental rates primarily concentrated in the capital and surrounding areas, while regional activity is subdued.

This extended overview from the Global Property Guide covers key aspects of the South Korean housing market and takes a closer look at its most recent developments and long-term trends.

Table of Contents

• Housing Market Snapshot
• Historic Perspective
• Demand Highlights
• Supply Highlights
• Rental Market
• Mortgage Market
• Socio-Economic Context

Housing Market Snapshot

South Korean residential property prices are exhibiting a complex and regionally uneven trajectory, shaped by restrictive monetary policy, constrained housing supply, and shifting buyer sentiment. The national market remains broadly stagnant, with the Bank of Korea's (BOK) Nationwide House Price Index recording a modest year-on-year increase of 0.31% in February 2025, equivalent to a 1.67% decline in real terms. Beneath this headline figure, however, pronounced regional disparities continue to drive market polarization.

South Korea's house price annual change:

Price growth remains concentrated in the Seoul metropolitan area. As of February 2025, the metropolitan House Price Index rose by 1.68% year-on-year, with Seoul itself posting a stronger increase of 3.63%. In contrast, markets outside the capital have entered their third consecutive year of decline, with larger regional cities facing steeper price contractions than smaller provincial areas.

This growing divergence is further reflected in data on newly built apartment sales from the Korean Statistical Information System (KOSIS). As of February 2025, the 12-month rolling average sale price in Seoul reached KRW 13.396 million (USD 9,272) per square meter - more than 2.3 times the national average of KRW 5.763 million (USD 3,989). The OECD's Regions and Cities at a Glance 2024 report, released in December 2024, identifies South Korea as having the widest housing price gap between large and small cities among OECD member countries.

Sales price dynamics, by submarket:

According to the Korea Housing Market Institute, national housing prices appear to have reached their lowest point in early 2023. The Institute's Housing Market Outlook and Policy Directions for 2025 report indicates "a high probability that the market will re-enter a rebound phase within the next six months." At the same time, the Institute's housing price forecast model - factoring in GDP growth, supply-demand dynamics, and interest rate trends - anticipates continued regional divergence. In 2025, prices in the Seoul metropolitan area are projected to rise by 0.8% year-on-year, with Seoul itself expected to see a stronger gain of 1.7%. Meanwhile, housing prices in regions outside the capital are forecast to decline by 1.4%, resulting in a projected nationwide annual decrease of 0.5%.

Historic Perspective:

Government Policies Steering Housing Market Fluctuations

In the early 2000s, the South Korean housing market saw rapid price growth, peaking in 2006 with a nominal House Price Index increasing by 11.51% year-on-year (9.22% inflation-adjusted). This period of speculation in urban areas, particularly Seoul, was followed by a slowdown with the 2008 global financial crisis. Although nominal prices continued to grow by 5.91% year-on-year in 2008, inflation-adjusted growth dropped to just 1.70%. The early 2010s saw prolonged stagnation. In 2012, nominal house prices fell by 1.42% annually, with inflation-adjusted prices dropping even further, by 2.81%. Weak demand and macroeconomic uncertainty contributed to these declines, despite low interest rates aimed at stimulating growth.

A turning point came in 2014 with new government policies, including lower interest rates and relaxed mortgage regulations, which boosted housing demand. Nominal house prices rose by 1.80% year-on-year in 2014 and by 3.42% in 2015. These gains coincided with a surge in housing starts, peaking at 716,759 units in 2015. However, in 2016 and 2017, annual nominal price growth slowed to 0.80% and 1.47%, respectively. Stricter regulations, such as loan-to-value (LTV) and debt-to-income (DTI) limits, aimed at curbing speculative buying, helped cool the market.

By 2018, nominal price growth had slowed to 1.00% year-on-year, with inflation-adjusted prices declining slightly (-0.31%). The government's regulatory efforts, coupled with a record number of housing completions in 2018 (626,889 units), led to more balanced market conditions. In 2019, nominal prices recorded a slight annual decline of 0.33%, reflecting softer demand in certain areas.

The market saw a resurgence in 2020 and 2021, fueled by low interest rates and pandemic-driven demand. Nominal prices jumped by 5.43% year-on-year in 2020 and by 9.87% in 2021, the strongest growth since the mid-2000s. However, this trend reversed sharply in 2022, as rising interest rates, introduced to combat inflation, and stricter mortgage regulations reduced demand. Nominal prices dropped annually by 4.68% in 2022, with inflation-adjusted prices falling by 9.24%.

The housing market appeared to have bottomed out in 2023, with nominal house prices declining by 3.51% year-on-year and real prices falling by 6.48%, reflecting the combined impact of elevated interest rates and subdued buyer sentiment. New housing starts dropped significantly to 242,188 units, indicating continued caution among developers. The number of building permits issued dropped by 17.83%. Early signs of recovery began to emerge in 2024. House prices posted a marginal year-on-year increase of 0.10%, while both residential completions and housing starts recorded positive annual growth, though activity remained below the long-term average, and the number of building permits issued remained stagnant.

20-year annual house price change (based on end-of-year House Price Index and Consumer Price Index):

Residential construction activity dynamic (started and completed housing units, and the number of building permits granted):

Data Sources: Ministry of Land, Infrastructure and Transport, KOSIS.

Demand Highlights:

Gradual Rise in Transactions, Yet Buyer Activity Remains Subdued

In 2024, South Korea's housing market began to show early signs of recovery following a significant decline in transactions in recent years. According to the Ministry of Land, Infrastructure and Transport, a total of 642,576 residential sales transactions were recorded nationwide during the year, marking a 15.77% year-on-year increase. Nevertheless, despite this rebound, the transaction volume remained 22.8% below the five-year average and 49.8% lower than the 2020 peak.

Positive, albeit slower, growth dynamics constrained by reduced purchasing power, carried on into 2025 with 89,020 transactions registered during the first two months of 2025, representing a 2.88% increase compared to January and February 2024.

Data Sources: Ministry of Land, Infrastructure and Transport, KOSIS.

Regionally, the Capital Region led the recovery in 2024, recording a 27.02% year-on-year increase in transaction volume. Seoul posted the strongest growth at 45.15% year-on-year, followed by Gyeonggi at 22.80% and Incheon at 11.80%. Other metropolitan cities experienced more moderate gains, ranging from 6.33% in Gwangju to 14.28% in Ulsan. Most regional cities also saw positive growth, with Jeju as the exception, reporting a 3.18% year-on-year decline.

Number of residential sales transactions, by submarket:

In its Housing Market Outlook and Policy Directions for 2025, the Korea Housing Market Institute forecasts that residential sales in 2025 will remain close to 2024 levels, at approximately 630,000 transactions, equivalent to 3.1% of the country's total housing stock. For comparison, during periods of normal market activity, annual transactions typically reached 900,000 units or 4-5% of the housing stock. This suggests that current and expected activity levels represent only about 70% of what is considered a normal, stable market.

Foreign ownership in the housing market continued to grow. As of the first half of 2024, 95,058 residential properties were held by foreign nationals - an 8.98% increase year-on-year, according to the latest survey by the Ministry of Land, Infrastructure and Transport. Chinese nationals accounted for the largest share at 56%, followed by Americans (22%), Canadians (7%), and Taiwanese (3%). Around 69% of all foreign-owned properties were located in the Capital Region, including 36% in Gyeonggi, 23% in Seoul, and 10% in Incheon.

Although foreign nationals are generally permitted to purchase property in South Korea, concerns are rising over speculative buying and regulatory gaps that allow non-residents to bypass housing rules aimed at curbing price surges and land speculation. "The problems need to be resolved urgently, as wealthy foreign nationals are buying homes at higher prices and adding to volatility in the housing market," said Kwon Dae-Jung, a real estate professor at Sogang University. He pointed out that Korean buyers face stricter tax regulations on multiple home ownership, while similar restrictions do not apply to foreigners. According to Kwon, while introducing more detailed rules for non-resident buyers may be complex, such measures "are getting crucial" as foreign demand continues to grow.

Supply Highlights:

Public Sector Drives Growth as Private Activity Remains Subdued

In recent years, residential construction activity in South Korea has experienced a notable slowdown. Despite some signs of recovery in 2024, key market indicators remain subdued. The sector continues to be constrained by stricter bridge loan and project financing (PF) conditions, as well as significantly higher financing costs, creating substantial challenges for private developers.

According to the Ministry of Land, Infrastructure and Transport, 449,835 housing units were completed nationwide in 2024, marking a modest year-on-year increase of 3.16%. Housing starts rose more substantially by 26.07% to 305,331 units, driven primarily by a surge in public housing development led by the Korea Land and Housing Corporation (LH). However, this growth still falls short of the government's estimated annual demand of approximately 450,000 units, suggesting a cumulative shortfall of around 500,000 units by the end of 2025.

Data Sources: Ministry of Land, Infrastructure and Transport, KOSIS.

At the regional level, housing completions in the Capital Region declined by 12.60% year-on-year, with Incheon recording the sharpest decrease at 22.62%. Conversely, Incheon led the region in new project starts, bolstered by strong growth in public sector activity. Starts in the Capital Region reached 165,150 units, up 36.39% year-on-year. Other metropolitan and regional cities also posted positive trends in both completions and starts.

Residential construction dynamics, by submarket:

The issuance of building permits - a leading indicator of future housing supply - remained largely stagnant. A total of 428,244 housing construction permits were granted nationwide in 2024, reflecting a marginal year-on-year decline of 0.12% and a 21.48% drop from the recent peak of 545,412 permits in 2021.

Data Sources: Ministry of Land, Infrastructure and Transport, KOSIS.

Regionally, the Capital Region was the only area to see growth in permit issuance, rising 11.70% to 227,357 permits. However, Incheon diverged from the trend, with permits falling by 30.20%. Permit activity in other metropolitan and regional cities also declined.

Number of residential construction permits granted, by submarket:

The Korea Housing Market Institute projects that abnormal lending restrictions and tightening PF conditions could lead to a 30% reduction in residential construction activity in 2025 compared to historical averages. While the government has implemented several regulatory relaxations, such as expediting approval processes and addressing inefficiencies in urban redevelopment, these measures have not yet translated into a significant supply response, largely due to ongoing challenges in housing finance and delays in land development.

The Housing Market Outlook and Policy Directions for 2025 underscores the urgency of normalizing housing finance regulations, particularly in relation to elevated premiums on mortgage and PF loans that have disproportionately affected end-users and constrained supply. The report also advocates for policy reforms aimed at reducing construction costs, easing PF restrictions, and alleviating excessive developer burdens such as mandated infrastructure contributions. Accelerating the development of public housing sites, especially in the third-phase new towns, is highlighted as a critical step toward increasing supply in the near term.

Rental Market:

Inflation Stabilized, Shift to Monthly Rents and Government Support Attract Institutional Investors

After a dip in 2023 and re-acceleration in early 2024, rental inflation in South Korea has stabilized in recent months, both in the long-term deposit (jeonse) and monthly rent (wolse) segments. The Integrated Rent Index published by the Korea Real Estate Board (REB) showed a 1.20% annual growth in March 2025, only marginally down from 1.28% at the end of last year but notably exceeding the -6.80% reported two years ago in March 2023. Long-term deposits increased 1.14% year-on-year, while monthly rents increased 1.19%.

South Korea's rent price index:

For both segments combined, the growth trajectory was primarily driven by apartment rents, which increased by 1.65% year-on-year in March 2025, compared to 0.5% for row houses and 0.23% for detached houses. At the same time, Global Property Guide research shows gross rental yields for apartments in the capital city of Seoul averaged 4.31% in April 2025, marginally up from 4.29% previously reported in October 2024.

Data Source: REB.

On the regional level, the most pronounced annual increase in rental prices was observed in Incheon (3.8%), followed by Seoul (2.7%) and Gyeonggi (2.1%). At the same time, Daegu, Daejeon, Sejong, Chungnam, Jeonnam, Gyeongbuk, and Jeju demonstrated a decrease in rents between 0.1% and 2.5% year-on-year.

In nominal terms, the capital city of Seoul and the surrounding province of Gyeonggi remain the most expensive rental markets, with both long-term deposits and monthly rents notably above the respective national averages.

Key rental indicators, by submarket:

As of 2019, 42% of South Korean households rented their residence, of which 15.1% were under the long-term deposit (jeonse) system, 19.7% were under monthly rent with a deposit, 3.3% paid monthly rent without a deposit, and 3.9% occupied their dwellings free of charge.

Under the traditional South Korean long-term deposit (jeonse) system, instead of making monthly payments, renters make lump-sum deposits (typically between 50% and 80% of property value), which are then reinvested by landlords to make a profit and are returned to renters at the end of the lease term. The system has been historically common in the country's rental market; however, in recent years, the share of households renting under it has been declining, while the monthly rent (wolse) system, combining deposits of varying amounts with regular monthly payments, has been gaining popularity. The jeonse system has been criticized for the difficulty of entering the rental market, the significant financial burden put on renters, as well as the limited protection it offers, leading to thousands of cases of landlord fraud reported every year.

"Following the jeonse fraud crisis in 2022, the proportion of monthly rentals in the housing lease market has risen sharply. As society becomes more accepting of monthly rent, and with more young people preferring to rent over buy, monthly rental demand is expected to grow further," says a recent article from The Chosun Daily. The outlet also notes that the increased relevance of the monthly rents model has been attracting foreign capital to the country, with investment banks, pension funds, and real estate companies forming joint ventures with local firms to start rental housing projects.

To boost the development of private rental housing and support institutional landlords, in August 2024, the Korean government announced a new Rental Housing Supply Plan, which eases certain restrictions for commercial operators (including rent control and corporate tax rates) and offers financial support measures.

Mortgage Market:

Interest Rates on Housing Loans Remain Elevated Despite Policy Cuts

Following the cuts in October, November, and February, which cumulatively brought the BOK's base rate down by 75 b.p., during the most recent monetary policy meeting in April 2025, the central bank decided to maintain the rate at its current standing of 2.75%. The regulator cited deterioration in global trade conditions and heightened uncertainty tied to the roll-out of the US tariffs as the main reasons to hold off further moves despite inflation and growth trajectories warranting another cut.

South Korea's mortgage loan interest rates:

The BOK Governor Rhee Chang-yong compared the current economic environment to entering "a tunnel suddenly gone dark," adding that the central bank would "wait until the light turns on again" before accelerating policy adjustments. "The current uncertainty is unprecedented <…> The basic scenario is difficult to define, let alone forecast future growth with confidence," he was quoted saying at a post-decision press conference.

At the same time, based on signals from the central bank, analysts cited by Reuters anticipate the next cut to be announced as soon as May and the base rate to reach 2.25% or even lower by the end of the year.

Data Source: BOK.

Despite the monetary easing cycle started by the central bank in October, interest rates on mortgage loans issued by South Korean banks have not yet shown signs of decrease. On the contrary, the weighted average interest rate on newly issued loans picked up from the three-year low of 3.5% in July 2024 and reached 4.23% by February 2025, according to the latest BOK figures. The weighted average rate for outstanding loans remained relatively stable at 4.18% in February 2025, only slightly below 4.31% a year ago, but still considerably elevated compared to pre-2022 levels.

The contradiction in interest rate trends is partially tied to the Korean government's ongoing efforts to prevent the overheating of the real estate market and curb the expansion of household debt through strong credit regulation policies and guidelines for commercial lenders, leading to individual banks raising their rates to suppress the inflow of new borrowers. "It is difficult to immediately lower lending interest rates as the pressure to manage household debt is still there," an official from a commercial bank told Yonhap News.

Weighted average interest rates on bank housing loans to households:

Previously, the Financial Services Commission (FSC), the South Korean government's top financial regulator, implemented stricter stressed debt-service ratio (DSR) regulations, the second phase of which went into effect in September 2024. The new regulation imposed a surplus interest (called stress interest) to reflect potential future interest rate hikes when the borrower executes the loan. Under the new system, borrowers may experience a 2-4% reduction in lending limits based on loan types, explained The Korea Herald.

Major banks followed suit, halting mortgage loans for multiple homeowners, restricting individuals' requests for mortgage loans, and raising their lending rates. The country's largest lender, KB Kookmin, decided not to provide credit loans exceeding customers' annual incomes.

At the same time, as an article from The Korea Economic Daily points out, while the government put pressure on major lenders in the Seoul metro area, "the balloon bulged elsewhere", with customers seeking home loans turning to regional banks, online banks, cooperatives, and other second-tier financial institutions.

According to the BOK data, after a slowdown in 2022 (2.9% annual growth compared to 7.9%, on average, in the previous decade), the balance of outstanding mortgage loans in the country increased by 5.0% in 2023 and 5.6% in 2024, reaching KRW 1,123.9 trillion (USD 0.8 trillion) at the end of the year. The share of mortgages in total household debt maintained by the financial system also continued to grow, increasing from 56.0% in 2021 to 60.2% in 2023 and 62.2% in 2024.

Of the total value of outstanding mortgages, about 64.8% is represented by loans from commercial and specialized banks, 10.0% by loans from non-bank depository institutions, and 25.3% by loans from other financial institutions. Sized against the national economy, the combined mortgage stock has been stable in recent years, fluctuating around 44% of GDP at current prices since 2020.

Data Source: BOK.

Socio-Economic Context:

Domestic and Global Uncertainty Hinder Economic Growth Prospects

South Korea's economic growth has somewhat recovered from a sharp slowdown in 2022-2023, showing a 2.0% real GDP growth in 2024. While the economic expansion had been previously expected to pick up to 2.3%-2.4% in 2025, recent domestic and global developments led to a downward adjustment of these projections. The February 2025 economic outlook from the BOK projected the growth to slow down to 1.5% this year, as both exports and domestic demand in the country face increasing downward pressures due to the implementation of the US tariff policy and heightened domestic political uncertainty.

Consumer Price Index (CPI) inflation in the country eased from more than a two-decade high of 5.1% in 2022 to 3.6% in 2023 and has been fluctuating at or below the BOK target of 2% since August 2024, most recently reported at 2.1% in March 2025. The central bank's latest outlook sees the annual inflation at 1.9% in 2025, with upside factors such as high exchange rates to be mitigated by downside factors like low demand pressure and the government's price stability measures.

Data Sources: IMF, BOK.

The South Korean labor market is traditionally characterized by high rigidity, high duality (meaning the market is fragmented into regular and non-regular workers), and long working hours. Regular workers enjoy better job security, more benefits, and higher wages than non-regular workers, while non-regular workers typically face much higher layoff rates and receive much lower wages and social benefits coverage in pension, health, and employment insurance. As of August 2024, non-regular workers made up 38.2% of all waged/salaried employees, up from 37.0% reported by the KOSIS a year prior.

The seasonally adjusted unemployment rate in the country has gone down since 2021 and was most recently reported at 2.9% in March 2025. The IMF projects unemployment in the country to stabilize at 3% from 2025 onward.

Data Source: BOK.

Overall, while strong economic fundamentals and sound macroeconomic policies have helped the Korean economy withstand multiple shocks in recent years, its current outlook is complicated by significant external and internal uncertainties.

Domestically, the country is scheduled to hold an early presidential election on June 3, 2025, after former President Yoon Suk Yeol's impeachment stemming from his short-lived martial law declaration in December 2024, which triggered a sharp divide between his supporters and opponents. Externally, the recent broad US trade action imposed 25% reciprocal tariffs on South Korea, which have been later paused by President Trump for three months. According to Reuters reporting, the Korean government now plans to negotiate with Washington to lower tariffs, as well as draft an extra budget spending of KRW 12 trillion to support the economy as it simultaneously tries to navigate a political crisis and an uncertain global trade environment.

Sources:

1. Korean Statistical Information System (KOSIS)
   1. Statistics by Topic (KO): https://kosis.kr/
2. Bank of Korea (BOK)
   1. Economic Statistics System: https://ecos.bok.or.kr/
   2. The Bank of Korea Base Rate: https://www.bok.or.kr/
   3. Monetary Policy Decision & Opening Remarks to the Press Conference (April 17, 2025): https://www.bok.or.kr/
   4. Inflation Targeting: https://www.bok.or.kr/
   5. Korea Economic Outlook (February 2025): https://www.bok.or.kr/
   6. Recent Economic Developments (April 2025): https://www.bok.or.kr/
3. Financial Services Commission (FSC)
   1. FSC Announces Plans for Implementing Stressed Debt Service Ratio Rules in H2 2024: https://fsc.go.kr/
4. Ministry of Land, Infrastructure and Transport
   1. Housing Statistics for December 24 (KO): https://www.molit.go.kr/
   2. Housing Statistics for February 25 (KO): https://www.molit.go.kr/
   3. Statistics on Foreign Land and Housing Ownership as of the end of June 2024 (KO): https://www.molit.go.kr/
   4. Announcement of "New Rental Housing Supply Plan for Housing Stability for the Common People, Middle Class, and Future Generations" (KO): https://www.molit.go.kr/
5. Korea Housing Institute
   1. Housing Market Outlook and Policy Directions for 2025 (KO): https://khi.re.kr/
6. Korea Real Estate Board (REB)
   1. National Housing Price Trend Survey_Monthly (March 2025): https://www.reb.or.kr/
7. Invest Korea
   1. Acquisition of Real Estate Related Laws: https://www.investkorea.org/
8. International Monetary Fund (IMF)
   1. Country Overview: Republic of Korea: https://www.imf.org/
   2. 2024 Article IV Staff Report: https://www.imf.org/
   3. Advancing Labor Market Reforms in Korea: https://www.imf.org/
9. OECD
   1. OECD Regions and Cities at a Glance 2024: https://www.oecd.org/
10. Federal Reserve Economic Data (FRED)
    1. South Korean Won to U.S. Dollar Spot Exchange Rate: https://fred.stlouisfed.org/
11. Fitch Ratings
    1. Fitch Affirms Korea at 'AA-'; Outlook Stable: https://www.fitchratings.com/
12. Savills
    1. Korea Housing Market, October 2024: https://pdf.savills.asia/
13. Kim & Chang
    1. Key Features of New Rental Housing Supply Plan for Housing Stability: https://www.kimchang.com/
14. The Korea Economic Daily
    1. BOK Stands Pat; Rate Cut Likely Within 3 Months as Economic Growth Slows: https://www.kedglobal.com/
    2. As Concerns Grow Over a Surge in Household Debt, Banks Raise Lending Rates Again (KO): https://www.hankyung.com/
    3. Korean Banks Raise Mortgage Rates Despite Looming Rate Cut: https://www.kedglobal.com/
    4. Korea's Credit Loans Balloon as Regulators Cap Mortgages: https://www.kedglobal.com/
    5. Korean Banks Raise Mortgage Rates Despite Looming Rate Cut: https://www.kedglobal.com/
    6. Korea's Household Debt Sees 'Balloon Effect' as Rules Tightened in Seoul: https://www.kedglobal.com/
15. The Korea Herald
    1. New Regulation on Housing Loans Comes Into Force: https://www.koreaherald.com/
16. The Korea Times
    1. Government Urged to Fill Regulatory Loopholes on Foreigners' Home Buying: https://www.koreatimes.co.kr/
17. The Chosun Daily
    1. Global Investors Flock to S. Korea's Expanding Monthly Rental Market: https://www.chosun.com/
18. The Economist
    1. Despite the Base Rate Cut… January Mortgage Rates 'Slightly Rise (KO): https://economist.co.kr/
19. Reuters
    1. Korea Signals Rate Cuts in May, Year Ahead as Trump Tariffs Pose 'Significant' Risks: https://www.reuters.com/
    2. South Korea Sets Snap Presidential Election for June 3, Drawing Out Contenders: https://www.reuters.com/
    3. South Korea Aims to Delay US Tariffs in Talks, Cooperate in Mutual Areas: https://www.reuters.com/
    4. US Treasury Sec Bessent Invites South Korea Finance Minister for Trade Talks Next Week: https://www.reuters.com/
20. Yonhap News
    1. The Base Rate Has Fallen, But the Four Major Banks' Mortgage Rates Have Actually Risen (KO): https://www.yna.co.kr/
21. YTN News
    1. The Base Rate Was Lowered, so Why Are Loan Rates Rising? (KO): https://www.ytn.co.kr/
22. Dong-A Ilbo
    1. More Than 10,000 People Fall Victim to Jeonse Fraud: https://www.donga.com/
    2. Youth Bearing the Brunt of Rental Fraud Impact: https://www.donga.com/