Persistent housing price increases in the Seoul metropolitan area could accelerate household debt and pose risks to South Korea’s financial stability, the Bank of Korea warned in its semi-annual report. Despite overall financial system stability in early 2025, the central bank is closely monitoring the rapid rise in Seoul real estate prices, which are highly sensitive to economic changes.
The gap between metropolitan and non-metropolitan housing trends is widening, with regulations on multi-homeownership also pushing demand into Seoul’s preferred areas. Policymakers cautioned that falling interest rates may intensify price pressures and household lending, stating that the risk of financial imbalances related to the housing market in Seoul has recently risen again. While the risk index remains below COVID-era levels, the BoK stressed the need for macroprudential policies and confidence in stable housing supply.
