Apartment buildings in Seoul. (Image courtesy of Yonhap)
SEOUL, June 18 (Korea Bizwire) — Housing prices in Seoul and non-capital regions have diverged further in recent years amid ongoing economic and social changes, and the government is advised to avoid stimulating construction investment through additional housing supply in non-capital areas, the central bank said Wednesday.
The gap in cumulative housing price increases between Seoul and the national average from December 2013 to May 2025 reached 69.4 percentage points, far higher than that of China at 49.8 percentage points, Japan’s 28.1 percentage points and Canada’s 24.5 percentage points, according to a report from the Bank of Korea (BOK).
The growth of the country’s nationwide housing prices has been relatively modest compared to other major economies since the COVID-19 pandemic, but housing prices in Seoul alone have risen more sharply than in other global capitals, the BOK said, adding that such a trend of a widening gap in housing prices has been intensifying since 2016.
“The polarization in housing prices is attributed to a combination of widening economic disparities between the capital and non-capital regions, population concentration in the greater Seoul area and past housing market stimulus policies,” the BOK said in the report.
It also noted that repeated nationwide housing supply expansion policies aimed at supporting the housing market have resulted in oversupply in non-capital regions, leading to a buildup of unsold homes and increasing structural downward pressure on housing prices.
“Rising home prices in the capital region have heightened household debt risks, while the prolonged decline in housing prices in non-capital areas has increased the risk of financial instability in the real estate sector,” the central bank warned.
“The government should exercise caution in implementing stimulus measures that promote construction investment through housing development in non-capital regions. It is essential to adopt region-specific macroprudential policies,” it added.
More fundamentally, the government needs to foster regional hub cities to reduce excessive regional imbalances and alleviate population concentration in the capital area, the report said.
(Yonhap)
