House prices fell by 0.53% y-o-y in 2019

After several years of lacklustre performance, South Korea’s housing market remains sluggish. House prices fell by 0.53% during 2019, from y-o-y changes of 1.85% in 2018, -0.15% in 2017, 0.04% in 2016, 3.14% in 2015 and 1.3% in 2014. During the latest quarter, house prices increased slightly by 0.68% from the previous quarter.

Housing restraint, economic stimulus

Elected on the promise of ending cosy ties between business and government, South Korea's new government has launched a fiscal plan that President Moon Jae-in has called 'a complete paradigm shift' based on US$9.85 billion extra spending, especially on social security, health, and small businesses, which will raise growth to 3%.

High housing costs are a political issue, so the government is targeting the "overheated speculative zone", comprised of the capital Seoul (all 25 districts) and two other areas -- Gwacheon and Sejong City. For those areas they've re-introduced increased capital gains tax (CGT) on property investors, originally introduced 2005-2014. Investors who own two houses pays an extra 10% in capital gains tax upon the sale of a property. Three-house owners can expect an extra 20% tax, in addition to baseline CGT of between 6-40%, depending on the size of the gain and the holding period.

Rents, rental yields: data unavailable in S. Korea

Recent news. South Korea’s economy grew by 2% in 2019 from a year earlier, down from 2018’s 2.7% growth and the slowest expansion since 2009, according to the Bank of Korea, amidst weak exports and facility investment. Economic growth is expected to fall further below 2% this year, after the fast-spreading COVID-19 started to make a dent to the country’s exports and domestic demand. 

In January 2020, the BOK kept its benchmark interest rate unchanged at 1.25%, following two rate cuts in October 2019 and July 2019, amidst slowing economy.