(Bloomberg) -- Apartment purchases dropped in Seoul for the first time in months, in a sign of cooling demand that may nudge the central bank toward a policy pivot next month.
The number of trades dropped to 3,124 in August from 8,728 in July, marking the first month-on-month fall since February, according to preliminary data updated daily by the Seoul city office. The average sales price also fell, dipping to 1.1 billion won ($820,000) per unit from 1.2 billion won a month earlier, a second consecutive slide, the data showed.
Seoul’s apartment market is a vital property market indicator being watched by the BOK as it mulls whether to end its record-long holding pattern. Apartments are the most prized real estate asset for South Korean consumers and their price rise in recent months has kept the BOK wary about cutting borrowing costs on fears such a move could encourage more mortgage borrowing and amplify household debt loads.
Authorities have sought to cool the market by tightening lending regulations and boosting housing supply. The number of purchases has long moved in tandem with prices and the latest data suggest demand may start to taper off, in a development that could give the BOK the greenlight to proceed with a rate cut.
With private spending staying weak and consumer inflation slowing, pressure has been mounting on the BOK to lower its benchmark rate from a restrictive 3.5%. Many economists now expect the bank to cut the rate when the board next sets policy on Oct. 11.
“Continued signals of domestic demand weakness, along with further disinflation over August-September, will push the balance of the BOK’s policy considerations towards easing — likely in October,” Jin Choi, an HSBC economist, said in a note.
BOK Governor Rhee Chang-yong has so far refrained from providing any hints on the likely timing of a potential rate cut. Household debt has been among Rhee’s top concerns since he took office in 2022. South Korea has one of the highest private debt-to-economy ratios in the developed world, with most people holding the bulk of their wealth in real estate.
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