South Korea's house prices rose by 2.02% y-o-y in Q1 2019

After several years of lacklustre performance, South Korea’s housing market is now showing sings of improvement. House prices rose by 2.02% during the year to Q1 2019, from y-o-y rises of 1.87% in Q4 2018, 0.76% in Q3, 0.45% in Q2 and 0.5% in Q1. In fact, it was the highest growth in three years. During the latest quarter, house prices fell by 0.28% from the previous quarter.

Housing restraint, economic stimulus ahead.   

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 economic growth slowed to 1.8% in Q1 2019 from a year earlier, significantly down from the previous quarter’s 3.1% growth, amidst a sharp drop in exports and slowing capital investments, according to the Bank of Korea (BOK). GDP actually shrank 0.3% quarter-on-quarter in Q1 2019, in contrast to a 1% expansion in Q4 2018 and the biggest slump since Q4 2008. Recently, the BOK lowered its growth outlook for 2019 to 2.5%, down from the initial forecast of 2.6%, citing economic uncertainties and weak exports.