While the apartment sales market has slowed down, with apartment prices in Korea falling for nine consecutive weeks and Seoul falling for six consecutive weeks, a series of cases of falling sales prices have also been detected in ultra-high-priced complexes in the Gangnam area. Concerns are rising that the real estate market, which has been strong until last year, may enter a long-term recession. In particular, in Korea, the residential and cultural environment is concentrated in apartments.
The apartment sales market, which had slowed down in the aftermath of the base rate hike and stricter loan regulations since the second half of last year, has rebounded for a while in the wake of the last presidential election and has been on the decline again. According to the weekly apartment price trend of the Korea Real Estate Agency on the 11th, apartment prices across the country fell 0.03% last week. The Seoul metropolitan area and Seoul also recorded -0.4% and -0.3% fluctuations, respectively, showing a decline for nine consecutive weeks in the metropolitan area and six consecutive weeks in Seoul.
Gangnam-gu (Seoul, a region with strong prices), which had remained steady despite the bearish market, also turned downward last week. Apartment prices have fallen in 17 weeks since the first week (-0.01%) of March as sales have accumulated mainly in Cheongdam and Dogok-dong.
The status of expensive apartment complexes in the Gangnam area is not as good as before. According to the Ministry of Land, Infrastructure and Transport’s open system, Dogok-dong Tower Palace (164.97㎡), a traditional Gangnam-gu landmark complex, was sold for 4.35 billion won on the 6th of last month, but the sale contract was signed at 4.25 billion won on the 29th of the same month. Raemian Brestige (59㎡) in Gaepo-dong also signed a sales contract last month at 2.14 billion won, down 160 million won from 2.3 billion won in August last year.
“Gangnam high-priced apartments are not directly affected by loan regulations or interest rate hikes,” he said. “At a time when the trading market itself is stagnant, there seems to be a growing perception that cash-rich people can buy or trade in urgent sales.”
As the real estate market freezes rapidly, six out of 10 people expect housing prices to fall in the second half of this year, according to a survey. According to a survey of users of its application (app) by the real estate platform Jikbang, 61.9% of 1,727 respondents said that the sale price of their homes will fall in the second half of this year.
By region, the metropolitan area, including Seoul (63.2%), Gyeonggi (63.7%), and Incheon (61.0%), all responded to the downward outlook of more than 60%. The most common reason for predicting a fall in housing prices was the “increase in interest burden due to interest rate hikes” (63.9%). It was followed by “reduction in demand due to the perception that the current price level is high” (15.0%), “burden of rising prices and economic slowdown” (12.1%), and “increase in sales due to heavy transfer taxes for multiple homeowners” (4.7%).
Experts are also not denying the weak market in the second half of the year. While the financial authorities continue to raise interest rates, the global economic slowdown is prolonged than expected due to the Russia-Ukraine crisis and the re-pandemic of COVID-19. Some are concerned about the side effects of the rapid decline in housing prices. If housing prices fall sharply while jeonse prices have risen significantly since the enforcement of the 2020 Lease Act, a so-called “can-can lease” phenomenon in which jeonse deposits (a unique system in Korea, that is, a system that can live without payment for about two years) surpass house prices may occur.
H.S HA
ASIA JOURNAL
