All sources have been thoroughly verified for credibility. Furthermore, an industry specialist has reviewed and approved the final article.
Everything you need to know is included in our South Korea Property Pack
Are you considering buying real estate in the land of K-pop? Are you unsure if it's better to buy now or wait until next year?
When it comes to market timing, there are varying opinions. Your Korean friend might tell you that now is the ideal time to buy property, while your colleagues in Seoul may think that prices will soon decline.
At BambooRoutes, when we create articles or update our pack of documents related to the real estate market in South Korea, we use factual data and statistics to analyze information, minimizing biases and uncertainties caused by opinions.
We have collected and examined all the official reports and statistics from government websites. Based on this extensive research, we have compiled a complete and reliable database. Here's what we discovered, which can assist you in deciding whether now is the right time to purchase real estate in South Korea.
Have a nice read!
How is the property market in South Korea currently?
South Korea is, today, an exceptionally stable country
Positive
Stability is a necessary condition when investing in real estate because it fosters predictable and reliable market conditions. It is an information you need as a foreigner looking to buy a property in South Korea.
You probably already know that South Korea is an extremely stable country. The last Fragile State Index reported for this country is 29.8, which one of the highest scores in the world.
South Korea's exceptional stability today can be attributed to its robust democratic institutions and a strong rule of law, which have fostered political stability and economic growth. Additionally, its strategic alliances, particularly with the United States, and its focus on technological innovation and education have further reinforced its resilience and adaptability in a rapidly changing global landscape.
All good for the stability. Now, let's redirect our attention to the economic forecast.
South Korea is on track for significant expansion
Positive
Before buying a property, consider the economic well-being of the country.
As projected by the IMF, South Korea is likely to finish 2024 with a growth rate of 2.3%, which affirms the country's positive direction. If we take 2025, the figure we're looking at is 2.3%.
Besides that, the economy will keep growing since South Korea's economy is expected to increase by 10.3% during the next 5 years, resulting in an average GDP growth rate of 2.1%.
The expected sustainable growth rate in South Korea indicates a stable and expanding economy, which can lead to increased demand for real estate as more people and businesses seek properties. This growth can drive property values up over time, offering potential appreciation and rental income for real estate investors.
That said, GDP growth is just one piece of the puzzle!
South Korean business owners don't have faith in the economy
Negative
What do Koreans people think of their economy? The GDP growth forecast won't tell us. Luckily, in South Korea there is a designated metric that is regularly reported. It's not the case for every country, so we're lucky.
Assessing business leaders' confidence in the current and future economic conditions, the Business Consumer Index (BCI) is calculated based on surveys and assessments.
The Bank of Korea's data indicates that the Business Confidence Index is currently -30 for South Korea. To help you with interpretation, a pessimistic outlook is typically associated with a negative BCI score.
This is not new, business operators were not confident 12 months ago either. The BCI score, back then, was at -27.
The negative Business Confidence Index in South Korea indicates a lack of confidence among local businesses, which can lead to a sluggish property market. Economic uncertainty may result in decreased investment and stagnant property price growth. Buyers might encounter limited property choices and face challenges in finding motivated sellers.
From growth to stability to decline in property prices in South Korea
Neutral
South Korea's home prices have increased by 20.1% in 5 years according to Kookmin bank, South Korea.
It means that if you had bought a modern apartment in Seoul for $750,000 five years ago, then it would now be worth around $901,000.
During these years, the trajectory of property prices has followed a pattern of growth, stability, and subsequent decline.
The current decline in property prices in South Korea should not always be regarded as a negative sign. It may potentially signify a market correction, creating an opportunity for you to invest in a property at a discounted price in South Korean cities.
You can find a more detailed analysis of the real estate prices in our property pack for South Korea.
Everything you need to know is included in our South Korea Property Pack
South Korea's population is getting richer
Positive
When it comes to buying real estate, population growth and GDP per capita play a significant role, because:
- a growing population means more people needing homes
- a higher GDP per person means people have more money to spend on housing (which can lead to increased property value over time)
In South Korea, the average GDP per capita has changed by 8.3% over the last 5 years. It's a good performance.
This means that, if you purchase a modern apartment in Seoul and rent it out, you will find that each year, you'll attract more tenants with sufficient funds to cover the rent.
If you're considering purchasing and renting it out, this trend is a good thing. Then, the demand for rentals is likely to go up in South Korean cities, such as Seoul, Busan, or Incheon in 2025.
You'll get weak rental yields in South Korea
Neutral
Turning our focus to the rental yield, let's investigate further.
It represents the annual rental income generated by a property divided by its purchase price or market value. For instance, if a property in South Korea is purchased for ₩500,000,000 and generates ₩25,000,000 in annual rental income, the rental yield would be 5%.
According to Numbeo, rental properties in South Korea offer gross rental yields ranging from 0.5% and 2.4%. You can find a more detailed analysis (by property and areas) in our pack of documents related to the real estate market in South Korea.
It means that your ability to generate substantial returns from a property investment may be limited.
Everything you need to know is included in our South Korea Property Pack
In South Korea, inflation is anticipated to be minimal
Neutral
Simply put, inflation is the increase in prices over time.
It's when your favorite plate of bibimbap costs 12,000 South Korean won instead of 10,000 South Korean won a couple of years ago.
If you're contemplating investing in a property, high inflation can offer several advantages:
- Property values have a tendency to increase over time, potentially leading to capital appreciation.
- Inflation can result in higher rental rates, thereby increasing the cash flow from the property.
- Inflation reduces the real value of debt, making mortgage payments more affordable.
- Real estate can act as a hedge against inflation, effectively preserving the value of the investment.
- Diversifying into real estate provides stability during inflationary periods.
In line with IMF predictions, over the next 5 years, South Korea will have an inflation rate of 1.0%, which gives us an average yearly increase of 0.2%.
This data is suggesting that South Korea is expected to have near-zero inflation then. Prices won't rise and then your property investment may not appreciate.
Is it a good time to buy real estate in South Korea then?
Let's wrap things up!
South Korea is known for its stability, both politically and economically, which makes it an attractive place for many investors. The country's economy is projected to grow by 10.3% over the next five years, with an average GDP growth rate of 2.1%. This kind of growth typically signals a healthy and expanding economy, which can lead to increased demand for real estate. As more people and businesses look for properties, the value of real estate can rise, potentially offering good returns for investors.
However, this growth and stability might not necessarily translate into the best time to buy property in 2025. As the economy grows, so does the demand for real estate, which can drive property prices up. If you're looking to buy in 2025, you might find that property prices have already increased significantly, making it a less favorable time to purchase compared to earlier years when prices were lower.
Additionally, while South Korea's population is becoming wealthier, the rental yields in the country are relatively low. According to Numbeo, gross rental yields range from just 0.5% to 2.4%. This means that even if you invest in property, the returns from renting it out might not be as lucrative as in other markets. Low rental yields can make it challenging to cover mortgage costs and other expenses associated with property ownership.
Moreover, with inflation expected to be minimal, the potential for property prices to increase significantly due to inflationary pressures is limited. This could mean that the appreciation of property values might not be as robust as in other markets where inflation is higher. Therefore, while South Korea remains a stable and growing economy, 2025 might not be the most opportune time to invest in real estate if you're looking for high returns or significant property value appreciation.
We genuinely hope this article has provided you with valuable insights and information.. If you need to know more, you can check our our pack of documents related to the real estate market in South Korea.
-Will real estate prices go up in South Korea?
This article is for informational purposes only and should not be considered financial advice. Readers are advised to consult with a qualified professional before making any investment decisions. We do not assume any liability for actions taken based on the information provided.