Seoul, South Korea’s capital, is a short hop from ski resorts, beaches and the 38th parallel north — the fractious demilitarised zone (DMZ) that buffers the country from North Korea.
The noisy neighbour might worry some, but it does not seem to have adversely affected the property market in Seoul, which lies just 35 miles from the DMZ. “People have been living with this for 60-plus years,” says Steven Craig, who until the end of 2017 was managing director of JLL Korea, the property services group. “No one factors it into their daily decision making, except expats maybe.”
Eight interest rate cuts since 2012 have propelled steady growth, and values hover near record highs. The city’s prime market has been particularly strong: Knight Frank’s annual wealth report shows values for the top 5 per cent of the market up 16.61 per cent in the year to December 2016 — figures bettered by just three cities globally.
Such striking growth prompted JLL to include Seoul in its ranking of the seven “Established World Cities” this year, alongside more established destinations such as New York, London, Paris and Hong Kong. Seoul has made a remarkable “rise from low-income city to global megacity”, notes JLL, which lauds the city’s “significant strides in raising its business and visitor profile, developing world-class universities and building its innovation capacity”.
Despite these strides, the “expat population is very, very small, once you exclude US military personnel”, says Craig. “Seoul is a Korean city.” The metropolitan area is home to about half of South Korea’s 50m population and Craig describes it as “the economic, political and cultural capital of Korea . . . I can’t think of another city that so dominates its host country like Seoul dominates Korea. There is no other serious option for someone wanting a good career.”
There have also been gains away from the prime markets. In the year to last July, apartment prices in Seoul rose 4.8 per cent, according to KB Kookmin Bank. The gains rounded off four years of growth in which the average apartment value increased more than 20 per cent, to over Won600m ($552,000).
There are signs, however, that growth is beginning to taper as the Moon Jae-in government — which took power last May following the impeachment of Park Geun-hye — attempts to restrain the buoyant market. The successive rate cuts that encouraged growth also helped push household debt in South Korea over 90 per cent of GDP. In response, the government began introducing measures last year to curb housing speculation and avoid a crash.
Seoul has been a particular focus of the crackdown, with successive measures introduced in November 2016 and last August to strengthen mortgage rules and increase costs for owners of multiple homes. Craig anticipates price falls in 2018, citing higher interest rates, tighter lending standards and higher income taxes as reasons. After years of solid growth, “there is no clear pathway for house prices to rise, unless incomes rise substantially”, he says.
Photographs: Getty Images/iStockphoto