Current household income across the country has increased 12.4% over the past five years from 57.05 million won in 2018 to 64.14 million won in 2022. On the other hand, the total market capitalization of housing has increased 51.5% from 4,314 trillion won in 2017 to 6,534 trillion won in 2021, deepening the rise and polarization of asset prices centered on the real estate market.

The polarization of asset prices is expected to intensify due to the recent sharp rises in real estate prices. Polarization due to sharp rises in asset prices causes an imbalance not only in the real economy, but also in the financial economy. This phenomenon acts as a structural factor that hinders regional economic growth in the long run. From this point of view, this report diagnoses the real estate price bubble as a major factor in the polarization of asset prices in Seoul and conducts an empirical analysis that could be used for policy-making.

Seoul's total asset was 8,171 billion won in 2022, an annual average increase of 7.7% between 2018 and 2022. Financial asset per household in Seoul was 176.5 million won in 2022 and real asset was 640.6 million won, which was more than three times of financial asset. Between 2018 and 2022, financial asset increased at an average annual rate of 2.5%, while real asset increased at an average annual rate of 9.4%. As of 2021, the total market capitalization of real estate in Seoul was 5,235 trillion won, the highest in the country. The market capitalization of real estate per capita was 551 million won in Seoul, with Gangnam-gu having the highest one in Seoul at 894.6 trillion won. Between January 2006 and September 2022, the median actual transaction price for apartment sales in Seoul was 638.5 million won on average. By region, the southeastern region had the highest at 10,222.5 million while the northeastern region had the lowest at 554.4 million. During the same period, the median price of apartment sales in Seoul was up to 13.57 million won per 1㎡ and a minimum of 31.86 million won. The highest price by region was 21.23 million won in the southeastern region.

As a result of analyzing the relationship between apartment sales prices, economic growth rates, and mortgage rates in Seoul through regression analysis, it was found that a 1%p change in the economic growth rate increased apartment sale price by 201,000 won, while a 1%p change in housing mortgage loans decreased it by 1,170,000 won. To estimate the apartment price bubble in Seoul, the jeonse-sale price ratio, state space model, and CAMP model were used in this study. During the analysis period, the ratio of jeonse and sales in Seoul was averaged 70.4%. By region, it was 70.0% in the southwest, 69.7% in the northwest, 67.3% in the northeast, 63.6% in the city center, and 55.6% in the southeast. As a result of analysis by the State Space Model (SSM) during the same period, the average bubble in Seoul was estimated at 213.9%. By region, it was 287.2% in the northwest, 240.9% in the northeast, 185.1% in the city center, 177.1% in the southwest, and 171.1% in the southeast. As a result of counterfactual simulation based on CAPM, it was found that the apartment price bubble in Seoul generated an average of 1.8% per month and a cumulative 159.2% over the past 12 years.