[Real Estate Investment] New Apartment Prices Soar Sky-High

National Apartment Move-in Volume Decreases by 28%
Gyeonggi-do Drops Sharply to 5,236 Units, Down 65%
Seoul's Last Pre-sale Rights Trading Complex
Demand Surges, Transactions at Twice the Sale Price

[Asia Economy Reporter Onyu Lim] As the supply of new apartments in the Seoul metropolitan area sharply decreases in March, forecasts suggest that the value of new apartments will rise even higher. Especially in Seoul, where reconstruction regulations?a key source of housing supply?have been tightened and tradable pre-sale rights have disappeared, the prices of new apartments are soaring. Although non-regulated areas in the metropolitan region, which have higher loan limits and shorter resale restriction periods, are emerging as alternatives, experts caution that investment should be approached carefully due to the relatively weak real demand base.

◆March apartment supply in Gyeonggi Province down 65% year-on-year= According to the real estate industry on the 9th, the nationwide apartment supply in March is estimated at 19,446 units, a 28% decrease compared to the same period last year. Thanks to supply in Daegu, Gwangju, and Chungbuk, the supply in provincial areas remained steady at 1,060 units, but the sharp decline in metropolitan area supply had a significant impact.

The major apartment supply in the metropolitan area was 9,386 units, down 47% year-on-year. The decrease in supply is particularly noticeable in Gyeonggi Province. The number of households scheduled to move in during March is 5,236, a 65% drop compared to the same period last year. In the government’s February 20 real estate measures, Suwon’s Yeongtong, Gwonseon, and Jangan districts, Anyang’s Manan district, and Uiwang city?designated as additional regulated areas?have no apartment supply in March. Ham Young-jin, head of Zigbang Big Data Lab, explained, "Last year, large-scale complexes mainly in southern Gyeonggi such as Yongin and Hwaseong Dongtan moved in, but this year, move-ins are proceeding mainly in small to medium-sized complexes." In Seoul, 2,150 units are scheduled for move-in, while Incheon has no move-in announcements for March.

Among the apartment complexes moving in during March, Mokdong Central I-Park Weave in Sinwol-dong, Yangcheon-gu, Seoul; Gimpo Hangang Kumho Eoullim 1 and 2 complexes in Yangchon-eup, Gimpo, Gyeonggi Province; and Dongcheon The Sharp East Foret in Dongcheon-dong, Suji-gu, Yongin attract attention. Mokdong Central I-Park Weave, moving in at the end of March, is a large complex with 3,045 units, 35 buildings, and units ranging from 52 to 101 square meters. The complex includes Shinnam Elementary School, and Shinnam and Gangshin Middle Schools are nearby. The opening of Jemulpo Tunnel, located near the complex, in the second half of this year is expected to improve access to Yeouido.

Gimpo Hangang Kumho Eoullim consists of 406 units in Complex 1 and 467 units in Complex 2, totaling 873 units. It is composed only of small to medium-sized units, up to 20 floors, with sizes ranging from 59 to 84 square meters. It is convenient to use the Gimpo Urban Railway Gurrae Station and is close to Hangang New Town, making access to amenities easy. Dongcheon The Sharp East Foret consists of 980 units ranging from 78 to 108 square meters. Educational facilities such as Suji Middle and Suji High Schools are nearby, and Suji Sports Park is located close by. It is a complex with good commuting conditions to Gangnam via Sinbundang Line Suji-gu Office Station or Dongcheon Station.

As new apartments become scarce, the metropolitan area’s jeonse (long-term lease) market is expected to maintain an upward trend for the time being. Lab head Ham said, "Until the first half of this year, there will not be many new apartment move-ins, but the influx of pre-sale waiting demand into the jeonse market and the expansion of regular university admissions will keep jeonse demand in the metropolitan area steady." The monthly supply of apartments in the metropolitan area from April to June is also expected to remain below 10,000 units each month.

In Seoul, where supply is limited and pre-sale right transactions are halted after March, the prices of new apartments are rising. According to the June 19, 2017 real estate measures, the resale restriction period for apartment pre-sale rights in all areas of Seoul has been extended to the date of ownership transfer registration. This effectively bans the resale of pre-sale rights before move-in. Although transactions of move-in rights held by association members are still possible, the conditions are strict, so the actual tradable volume is limited. Only association members who own one house, have lived there for more than five years, and held ownership for more than ten years, or cases where all household members move due to marriage, schooling, or immigration, can sell.

◆Pre-sale right transactions in Seoul will be blocked after March= The last apartment complexes in Seoul where pre-sale rights can be traded are those that announced move-in recruitment before the measures. Most of these complexes, which avoided regulations, will complete move-ins by March.

As demand rushes to catch the last chance to trade pre-sale rights, these complexes are mostly traded at prices around twice the pre-sale price. For example, a 59㎡ unit in Haemoro, Baekryeonsan, Eunpyeong-gu, Seoul, was sold for 727 million KRW in February, with a premium of over 400 million KRW on the pre-sale price of 330 million KRW. The 84㎡ unit in Eunpyeong-gu’s Nokbeon Station E-Pyeon Sesang Lotte Castle was also traded in January at nearly twice the pre-sale price, 1.16 billion KRW, while the pre-sale price was 650 million KRW.

However, recent regulations such as the private land pre-sale price ceiling system, excess profit recovery system, and strengthened safety inspections have slowed down major reconstruction projects in Seoul. Experts analyze that concerns over the shortage of new apartment supply in Seoul are leading to rapid price increases. For example, a 59㎡ unit in Godeok Arteon, Sangil-dong, Gangdong-gu, Seoul, which recently started move-ins, was sold for 610 million KRW at pre-sale and traded for 1.18 billion KRW in February. Despite the appearance of a large complex with over 4,000 units all at once, actual transaction prices continue to rise after move-in.

◆Demand turning to non-regulated areas= Due to rising house prices in Seoul and strengthened regulations, real demand buyers urgently seeking homes and some investors unable to find suitable investment destinations have recently turned their attention to non-regulated areas. According to the Gyeonggi Real Estate Portal, as of February 6, the number of pre-sale and move-in right transactions in Gimpo city was 456, the highest in 25 months since January 2018 (481 transactions). On the 5th, a pre-sale right for a 59㎡ unit in Uijeongbu Uijeongbu Station Central Xi & Weave Castle, where resale restrictions were lifted, had a premium of over 100 million KRW. However, experts advise caution when trading in these areas, which have been left out of the recent price rise trend. Jang Jae-hyun, head of Real Today, said, "In a real estate downturn, these areas may see prices fall faster compared to Seoul or metropolitan areas with good accessibility. Careful judgment considering various factors including location is necessary."

This content was produced with the assistance of AI translation services.