Seoul Housing Market Splits as Gangnam Falls, Gangbuk Surges

* Editor's note: AI PRISM (Personalized Report & Insight Summarizing Media) is an artificial intelligence-based personalized news recommendation and summary service developed with support from the Korea Press Foundation. It selects and provides six news items tailored to each reader type.

1. Gangnam, Seocho Fall for Fourth Week as Gangbuk's 14 Districts Run Hot

Key summary: In the last week of August, as of the 31st, apartment prices in Gangnam District fell 0.41% from the previous week. After starting the first week of August with a 0.01% gain, Gangnam widened its losses for four straight weeks, and the entire southeastern zone, which includes the four Gangnam-area districts, turned negative at minus 0.12%. By contrast, an 84-square-meter unit at Daewoo in Ui-dong, Gangbuk District, jumped 95 million won in two weeks, and a 78-square-meter unit at Samsung Raemian in Guro District rose 100 million won in a month. Nam Hyuk-woo of the Woori Bank Real Estate Research Institute said slowing transactions and price weakness in the Gangnam area are likely to continue for some time, while the decoupling in Seoul's mid- and lower-priced areas, where purchases are led mainly by owner-occupier buyers who do not own a home, could persist.

2. As Rental Operator Tax Breaks End, Ruling Party Also Calls for Adjustment

Key summary: The government plans to phase out, starting in 2028, exemptions from heavier capital gains taxes and preferential long-term holding deductions that had applied to apartments purchased in regulated zones. Rep. Lee Eon-ju of the Democratic Party of Korea said at a forum on the 3rd that policy should not undermine the trust of landlords who trusted the system and served out mandatory lease periods. The Ministry of Economy and Finance said the reduction in tax benefits is limited to purchased apartments located in regulated zones such as Seoul, and that villas and officetels in Seoul are not affected. The government is also considering exempting such properties from the land transaction permit system and having public real estate investment trusts buy them in cases where a sale is difficult because a tenant is in place.

3. Financial Seed Money for Stalled Sites as Real Estate Development Equity Fund Emerges

Key summary: The Korea Developers Association (KODA) and KB Securities signed a memorandum of understanding on the 3rd to jointly establish a real estate development equity fund. Under the arrangement, the association will identify strong projects through its network of some 1,000 member companies and more than 2,200 registered development businesses, while KB Securities provides financial screening and management infrastructure. The fund is expected to help ease the housing supply shortage in the greater Seoul area by supporting small and mid-sized developers stuck at the early stages of construction because of changes to the project financing system and difficulties in raising bridge loans. The two sides plan to hold working-level talks and a project briefing immediately after the agreement and begin screening candidate sites right away.

4. Locked in a Range as High Rates Persist: REIT Stocks

Key summary: About four months after JR Global REIT filed for rehabilitation, prices of domestic REIT stocks have yet to rebound. SK REIT fell from 7,090 won on April 27 to a year-to-date low of 4,800 won and has since been stuck in a range of 5,300 to 5,800 won, while the KRX Real Estate REIT Infrastructure Index fell 19% over the same period and is moving sideways between 1,200 and 1,250. TIGER REIT Real Estate Infrastructure has returned minus 2.91% year to date, and KODEX Korea Real Estate REIT Infrastructure minus 8.51%. Lee Eun-sang, an analyst at NH Investment & Securities, said the scope for improvement is limited because there has been no major change in interest rates or the funding environment, adding that the stable funding capacity of sponsor-backed REITs is being reassessed.

5. U.S. 10-Year Yield Hits Three-Year High

Key summary: The yield on 10-year U.S. Treasury notes climbed as high as 4.818% during the session, the highest in 34 months since November 2023. The 30-year yield also surged to 5.296%, approaching its previous peak of 5.337% once again. Bargain hunting eased the 10-year yield slightly to 4.782% late in the session, but Wall Street expects yields to keep rising against a backdrop of higher international oil prices and growing government debt. Major central banks including the European Central Bank and the Bank of Japan have also signaled possible rate increases this month, which analysts say will add pressure to the environment for domestic REITs and real estate finance.

6. Split-Up Reform Leaves Out Plan to Fix LH's 173 Trillion Won Debt

Key summary: The government has unveiled a reform plan to split LH into a development corporation and an asset corporation for the first time in 17 years, but it did not disclose specific measures to improve the company's finances. LH's debt stood at 173.6567 trillion won at the end of last year, up 13.5512 trillion won in a year, and is projected to swell to 372.8 trillion won by 2030. A structural deficit also remains a challenge, with operating losses on rental housing rising about 2.7-fold from 1.1706 trillion won in 2016 to 3.1949 trillion won last year. Industry watchers call it a half-measure because no plan was presented for handling the bad company after the split, and analysts say that has increased uncertainty over whether the target of supplying 1.58 million homes by 2030 can be met.