Lee administration risks repeating Moon-era housing policy missteps as prices climb

A tourist takes a photo of apartment complexes from Mount Nam in Seoul, Thursday. Yonhap

The prolonged rise in Seoul’s housing prices is once again raising concerns as President Lee Jae Myung may be repeating the regulatory missteps of former President Moon Jae-in. Moon’s 2017–22 administration imposed multiple housing curbs but ultimately failed to stabilize the market.

Less than six months into his term, Lee’s administration introduced two rounds of tightened lending regulations. The first came on June 27, capping housing loans in Seoul at 600 million won ($418,000). The second followed on Sept. 7, lowering the loan-to-value (LTV) ratio in regulated areas of the city from 50 percent to 40 percent.

Nevertheless, data from multiple sources suggested that the real estate market in Seoul and the broader capital region continues to heat up.

According to the government-affiliated Korea Real Estate Board, Seoul apartment prices rose 0.41 percent throughout August, while the metropolitan area saw a 0.14 percent increase over the same period.

Growth accelerated in September, with Seoul rising 0.76 percent and the surrounding region 0.29 percent.

Separate data from KB Land, an affiliate of KB Kookmin Bank, showed that Seoul apartment prices rose by 0.21 percent as of Sept. 15 — just before the Sept. 7 policy announcement — and climbed further to 0.43 percent by Sept. 29.

KB Land also reported that 11 neighborhoods across Gangnam District, Seocho District and Songpa District — three of Seoul's most upscale districts — saw average apartment prices surpass 1.8 billion won in September, up from 1.5 billion won in January.

This price surge has occurred despite a sharp decline in the average amount homebuyers are borrowing across Seoul.

According to the Ministry of Land, Infrastructure and Transport, the average citywide mortgage amount fell by more than 100 million won from June to August.

In Gangnam, Seocho and Songpa districts, the drop was even more dramatic.

Gangnam saw a decrease from 869 million won to 254 million won, while Seocho declined from 614 million won to 267 million won. In Songpa, average mortgage amounts fell from around 300 million won to around 100 million won.

“The upward trend in housing prices despite falling mortgage amounts suggests that prospective homebuyers are turning to non-bank sources to finance their purchases,” said Kwon Dae-jung, a chair professor in real estate at Hansung University.

He noted that borrowers are increasingly relying on credit card companies, insurance firms and private lenders when they don’t qualify for traditional bank loans.

“Under these circumstances, the Lee administration’s restrictive measures do not appear to be letting up — a pattern reminiscent of the Moon administration,” Kwon said.

Citing sources familiar with the matter, he noted that the Financial Services Commission (FSC) is considering further tightening measures, including reducing the mortgage cap in Seoul from 600 million won to 400 million won.

The FSC is also reportedly reviewing a cut to the debt service ratio, from the current 40 percent to around 35 percent, a move that would further limit the capacity of borrowers.

Kwon pointed to the Moon Jae-in administration’s track record — despite more than 20 rounds of housing regulations, prices continued to soar.

“It’s a cautionary tale the current administration may be on the path to repeating,” the professor said.