Korean real estate news-Exchange Rate Surge: How It Affects Korea’s Real Estate & Construction

The recent surge in exchange rates surpassing 1,460 KRW has caused widespread ripples across the Korean economy . Particularly, the construction and real estate sectors are facing compounded challenges, including rising construction costs, high-interest rates, and political uncertainty. This article delves into how the exchange rate hike is affecting these industries, examines key phenomena, and explores market forecasts. Key Insights on Exchange Rate Impacts on Construction and Real Estate The Impact of Rising Exchange Rates on the Construction Industry Increasing Construction Costs and Imported Material Prices Exchange rate surges lead to higher costs for imported raw materials, intensifying construction cost inflation. Construction Cost Index : Increased from a baseline of 100 in January 2020 to 130.32 in October 2024. Exchange Rate Movement : Jumped from 1,160 KRW in 2020 to 1,466 KRW in 2024. Seon-gu Park, Director of the Economic and Financial Research Division at the ...

Korean real estate news-2025 Housing Market Outlook: Supply Shortages and Demand Growth

Forecast for the Korean housing market in 2025

 The 2025 housing market is poised to undergo significant changes driven by decreasing supply and increasing demand. As major construction companies reduce their plans and housing prices show a potential rise, strategic market participation will be key.

1. Reduced Supply from Major Builders

South Korea’s top five construction companies (Samsung C&T, Hyundai E&C, Daewoo E&C, DL E&C, GS E&C) are planning to supply approximately 59,000 apartment units in 2025. This marks a 12% decline compared to the 67,000 units supplied this year, signaling a notable shift in the housing supply market.

Key Regions in the Capital Area

In Seoul, redevelopment projects in Gangnam and New Town areas are expected to attract significant attention. Notable projects include the “Raemian One Perla” in Seocho’s Bangbae-dong and the Eunhasu redevelopment in Gangnam’s Yeoksam-dong. Other key areas include the New Town projects in Noryangjin-dong and Sillim-dong, which are expected to see strong demand.

Regional Projects and Unsold Risks

In regional cities such as Cheonan, Daegu, and Busan, delayed supply from previous years will finally hit the market. However, with local housing markets still sluggish, concerns about unsold units remain high. Industry insiders cite rising construction costs and political uncertainties as major challenges.

2. Housing Prices to Rise Amid Supply Shortages

The Korea Housing Institute predicts a 1.7% increase in Seoul’s housing prices in 2025, with the greater Seoul area expected to see a modest 0.8% rise. Nationwide, prices are projected to drop slightly by 0.5%.

Worsening Supply Shortages

Permits for new housing units are expected to drop by 6% in 2025 compared to this year, while completed housing will see a steep decline of nearly 25%. This supply shortage is expected to exacerbate housing demand, especially in urban areas.

Changing Demand Dynamics

The increasing number of homebuyers in their 30s is expected to drive demand further. Market stabilization could also gain momentum if mortgage rates are lowered and loan regulations eased.

3. Policy Challenges and Financial Regulation

Another key factor shaping the 2025 housing market is government policy. Stricter financial regulations, including the Total Debt Service Ratio (DSR), continue to place pressure on both homebuyers and construction companies.

The Impact of PF Regulations

Construction firms are particularly burdened by the 20% equity requirement for project financing (PF). This regulation is seen as a barrier to revitalizing the housing construction sector.

Calls for Policy Revisions

Experts argue that the government’s strict application of DSR is unique and potentially harmful to the market. Relaxing these regulations could help improve market dynamics and better support both demand and supply sides.

4. Diverging Outlook for Regional and Capital Markets

The 2025 market is likely to see contrasting trends between regional cities and the capital area. While Seoul and surrounding areas are expected to maintain a steady rise in prices, regional markets face uncertainties due to weak demand and oversupply risks.

Challenges in Regional Markets

Cities such as Cheonan, Daegu, and Busan will release significant delayed supply in 2025. However, the risk of unsold units remains high due to stagnant market conditions.

Opportunities in the Capital Area

In contrast, the capital area, including Seoul, continues to show strong demand, particularly in redevelopment hotspots like Gangnam and Gwacheon. These areas are expected to be the focal points of the housing market in 2025.

Conclusion: Navigating Market Shifts

The 2025 housing market will be shaped by supply shortages and changing demand patterns, creating both challenges and opportunities. While Seoul and the greater capital area are poised for price increases, regional markets face heightened risks.

To succeed in this shifting landscape, stakeholders must adopt strategic approaches, monitor policy changes, and stay informed about evolving market trends. Government actions, such as regulatory adjustments, will play a pivotal role in determining the pace of market recovery.

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