ED Housing crisis fueled by policy missteps
Apartment buildings stand along the Han River in Seongdong District, Seoul, Dec. 7. Apartment transactions in the area plunged dramatically in November, with 2,372 deals reported through Dec. 6, down from 8,663 in October, according to the Ministry of Land, Infrastructure and Transport’s real transaction system. Yonhap
Genuine stability for ordinary citizens must be policy priority
The nation's housing market is sending out warning signs. Home prices in Seoul have surged at a pace unseen in recent years, while rents — both jeonse deposits and monthly — are rising sharply, inflicting growing hardship on ordinary households. Fears of a full-blown housing crisis have intensified following forecasts that next year’s apartment supply in Seoul will fall to nearly half this year’s level. With prices climbing and supply drying up, the outlook for would-be homeowners and renters alike is increasingly bleak.
According to real estate platform Zigbang, the nationwide supply of move-in-ready apartments is projected at roughly 172,000 units for next year, a decline of nearly 30 percent from this year. The situation is most alarming in Seoul, where expected supply will plunge by 48 percent to just over 16,000 units. In a city where demand remains persistently strong, such a sharp contraction in new housing is almost guaranteed to exacerbate price instability.
The effects are already visible. Seoul apartment prices rose more than 8 percent during the first 11 months of this year, surpassing even the peak annual increase recorded in 2018. The surge in home prices and jeonse deposits has spilled over into the monthly rental market. Apartment rents in Seoul this year have climbed 3.29 percent through November, on track to exceed 3 percent annually for the first time since official records began. The average monthly rent now stands at around 1.48 million won ($998) — nearly one-quarter of the median income for a four-person household.
Such figures underscore the social gravity of the problem. When households must devote a quarter of their income to housing, saving for homeownership becomes nearly impossible, and even basic consumption is constrained. The burden falls most heavily on renters, young people and lower-income families, while the broader economy suffers from weakened consumer spending.
Government policy has played a significant role in shaping this outcome. Over the past year alone, market liquidity has expanded by more than 350 trillion won. Yet rather than prioritizing supply expansion, the administration has relied heavily on demand-suppression measures, placing nearly all of Seoul under regulatory constraints. The result has been a mismatch: abundant money chasing a dwindling pool of homes.
Moreover, tighter rules on jeonse loans and strict owner-occupancy requirements have reduced rental supply, accelerating the shift from large deposits to monthly rents. Measures intended to restrain purchase prices have inadvertently distorted the rental market, pushing costs higher for those least able to absorb them. Transaction restrictions, such as expanded land transaction permit zones, have also produced unintended consequences, encouraging cash-rich buyers to concentrate purchases in high-end districts and deepening price polarization.
Importantly, this instability is not confined to Seoul. Price volatility has spread to surrounding metropolitan areas such as Gwacheon and Seongnam's Bundang District, as well as major regional cities including Busan. A series of housing measures — including loan restrictions and regulatory packages — have failed to stabilize the market. Instead, they have reinforced a familiar pattern: suppressing one segment of demand only displaces pressure elsewhere.
This “whack-a-mole” approach to housing policy is not new. During the administration of former President Moon Jae-in, no fewer than 28 real estate measures were introduced over five years, yet prices continued to rise. Housing markets by their nature resist short-term fixes and punitive regulations. Without credible signals of future supply, expectations harden and speculative behavior intensifies.
Experts overwhelmingly agree that there is no substitute for significantly expanding housing supply in areas with the strongest demand. The government has indicated that a new supply plan will be announced early next year, but what matters is substance. Regulatory easing for redevelopment and reconstruction projects, improved conditions for private-sector construction and clear long-term supply commitments are essential to restoring market confidence.
The priority of housing policy should not be symbolic price control in affluent districts, but genuine stability for ordinary citizens. If the forthcoming measures fail to alter expectations meaningfully, the market will once again absorb them with little effect. Korea has already learned, at great cost, that repeating policy mistakes only strengthens market resistance. This time, the government must choose a different path — one that addresses the root of the crisis rather than its symptoms.