South Korea’s overheated housing market is showing signs of slowing, as house prices in Seoul have fallen slightly in recent months amid lingering inflation and rising interest rates that are squeezing household budgets.

Apartment prices in Apgujeong-dong, a wealthy neighborhood in Gangnam-gu, Seoul, fell 300 million won ($230,000) in June, according to the land ministry on Monday, from the previous month.

A slowdown in prices was palpable in other affluent Seoul neighborhoods like Songpa-gu and Mapo-gu, where recent price cuts ranged from 120 million won to 200 million won over a two-month period.

A survey by local real estate technology company and ratings platform Zigbang showed on Monday that households were holding back on home purchases due to rising rates, which would worsen their repayment burdens.

According to the survey of 1,727 users of the Zigbang app from June 20 to July 4, six out of 10 Koreans planning to buy a house believe housing prices will start to fall in the second half of this year. The Bank of Korea is expected to hike rates stronger than expected on Wednesday to tame persistent inflation.

More people living in Seoul and its surrounding areas of Incheon and Gyeonggi Province — where demand continues to outstrip supply, fueling the price spike — are betting on lower prices than those living elsewhere. First-time buyers are more likely to expect house prices to fall than those who own a home.

In addition to repayment charges, respondents cited lower demand, an economic slowdown and increased housing supply caused by recently eased housing restrictions as factors contributing to a potentially declining housing market in the coming months. coming.

Meanwhile, more respondents expected to see a drop in the cost of “jeonse”, where tenants pay a lump sum cash deposit to rent a house and get it back once the standard two-year contract expires.

There are more jeonse owners and tenants are increasingly finding monthly rentals more attractive than two-year deals, according to the survey. Monthly rentals were preferred to jeonse in January-May this year for the first time, according to the Lands Ministry.

Zigbang said factors such as rising rates, inflation and an economic slowdown will undermine demand and drive down house prices. It remains to be seen how the relaxed property restrictions would affect the market, he added.

By Choi Si-young ([email protected])