[Seoul=Newsis] Reporter Kim Sun-woong: On the 24th, property listings were displayed at a real estate agency within an apartment complex in Songpa-gu, Seoul. 2025.02.24. /Photo=Kim Sun-woong.
Concerns are being raised that the enthusiasm for purchasing apartments in the Gangnam area of Seoul could spread throughout the city due to the lowering of the base interest rate. The reason is that in a situation where financial authorities are pressuring banks to lower loan interest rates, a decrease in mortgage interest rates could stimulate potential buyers who are waiting to purchase.
The Bank of Korea’s Monetary Policy Committee reduced the base interest rate from 3% to 2.75% on the 25th. This is the third reduction in the base interest rate since October of last year.
The real estate industry analyzes that there is a high possibility that the buying trend for apartments in the Gangnam area will intensify following the base interest rate cut. The demand for buying Gangnam apartments is already high, and if loan interest rates fall, additional demand could increase further.
In fact, after the lifting of the land transaction permit zone in areas like Jamsil, Samseong, Daechi, and Cheongdam (collectively known as Jamsamdaechang) on the 12th, apartment prices in Gangnam, centered around Songpa, have risen significantly. According to the Korea Real Estate Board, as of the 17th, apartment prices in Seoul rose by 0.06% compared to the previous week, with rises especially noticeable in Songpa-gu (0.36%), where Jamsil is located, and Gangnam-gu (0.27%), where Daechi and Samseong are located.
If the drop in loan interest rates is significant, there is concern that the buying enthusiasm could spread to other areas of Seoul beyond the Gangnam area. With financial authorities pressuring banks to lower loan interest rates alongside the reduction in the base rate, the mortgage interest rate could fall significantly. If buyers, who have more room for repayment than before, attempt to buy more expensive apartments, it could trigger a chain reaction that increases the overall housing prices in Seoul.
On the 24th, Kim Byeong-hwan, Chairman of the Financial Services Commission, stated at a regular briefing, “The reduction in the base rate must be reflected in loan interest rates,” and added, “It’s time for banks to lower their loan interest rates.” Despite consecutive cuts in the base interest rate by the Bank of Korea in October and November last year, bank mortgage rates remained at around 4% and did not decrease.
Kim In-man, Director of the Kim In-man Real Estate Economic Research Institute, predicted, “If there is no measure following this base interest rate cut, there is a possibility that the buying enthusiasm for real estate in the Gangnam area will spread to the outer areas of Seoul, such as Nowon, Dobong, and Gangbuk (collectively known as Nodogang).”
On the other hand, some believe that the expansion of buying demand throughout Seoul is premature. Ham Young-jin, Director of Woori Bank’s Real Estate Research Lab, said, “The monthly transaction volume of apartments in Seoul is still around 3,000,” and projected, “The expansion of buying demand to the whole of Seoul will be influenced by variables such as the resolution of political instability and the pace and magnitude of further base rate cuts,” and “The spread of purchasing demand throughout Seoul will be limited in the first half of this year.”