Seoul Home Prices: Expert Hong Chun-wook Offers Diagnosis

Hong Chun-wook, CEO of Prism Investment Advisory, analyzed the phenomenon of Seoul apartment prices rising despite the expiration of capital gains tax relief measures and strengthened loan regulations in May 2026, pointing out that predictions of a significant household debt reduction are incorrect.

Citing 60 years of real estate transaction records and a mean reversion model, Hong refuted claims by some experts warning of a housing market crash due to household debt exceeding 100% of GDP, stating these arguments fail to reflect the latest statistics. He explained that since financial authorities began tightening regulations on loans such as jeonse (lump-sum deposit) loans in 2021, the household debt-to-GDP ratio has decreased by approximately 20 percentage points from its peak, achieving 'deleveraging' and debt reduction.

The fundamental reason for the continued rise in Seoul home prices was attributed to the 'cluster effect.' This refers to Seoul's concentration of good schools, jobs, and people with similar tendencies, forming strong social networks that are difficult to alter through policy alone, unless the national economy faces severe difficulties.

Hong stated that an analysis of real estate policies since 1965, spanning 61 years, shows only the Roh Tae-woo administration succeeded in overcoming market forces with government regulations. He analyzed that current market stimulants include corporate performance improvements, such as the tens of trillions of won in cash released from substantial bonuses paid by semiconductor companies like Samsung Electronics and SK Hynix.

He assessed the current market situation as having 'passed the bottom and is now past the 70% mark,' proposing the abolition of the apartment pre-sale price cap system, the deferral of heavy capital gains taxes, and the easing of regulations on owning two homes as the 'three major signals.'