"Ultra-High Price Regulations and COVID-19... Reality of Transaction Freeze in Gangnam Area"

[Asia Economy Reporters Yuri Kim and Donghyun Choi] The housing sales market in Seoul's Gangnam area is rapidly freezing up due to the government's tightening of loan regulations combined with the novel coronavirus disease (COVID-19). Despite a surge in urgent sale listings with asking prices lowered by several hundred million won in each complex, buyer inquiries have sharply dropped off. As signs of a transaction freeze emerge in Gangnam, the epicenter of rising home prices, there are expectations that a correction phase will begin in earnest.

According to industry sources on the 16th, in the Gangnam area of Seoul, sales transactions have been occurring at prices several hundred million won below market value since the beginning of this month. According to the Ministry of Land, Infrastructure and Transport's actual transaction price system, on the 6th, an 84㎡ (exclusive area) 8th-floor unit in Jamsil L'Centz, Jamsil-dong, Songpa-gu, Seoul, was sold for 1.6 billion won. This is 350 million won lower than a 9th-floor unit of the same size sold for 1.95 billion won on the 20th of last month. The market debated whether this transaction was an urgent sale or a gift. A representative from real estate agency A in Jamsil-dong said, "Even for an urgent sale, the price is too low," and estimated that it was likely a transaction between related parties such as family members.

Similar cases of asking prices and actual transaction prices dropping by 200 to 300 million won within a month are emerging in other complexes as well. The recent asking price for an 84㎡ unit in Banpo Xi, Banpo-dong, Seocho-gu, which was sold for 2.7 billion won on the 22nd of last month, has fallen to the high 2.4 billion won range. In Gaepo-dong, Gangnam-gu, a reconstruction complex, a 58㎡ (1st floor) unit in Gaepo Jugong 1 Complex was sold for 2.26 billion won on the 2nd. Compared to the 2.42 billion won transaction on the 15th of last month, this is 160 million won lower.

Although urgent sale listings are appearing throughout Gangnam, transactions are rapidly shrinking. Due to the December 16th measures that completely banned mortgage loans for homes priced over 1.5 billion won, the transaction volume in the four Gangnam districts?Gangnam, Seocho, Songpa, and Gangdong?where ultra-high-end apartments are concentrated, has sharply decreased. Additionally, with the official declaration of the COVID-19 pandemic and growing concerns over a global economic downturn, the market is rapidly contracting.

According to the Seoul Real Estate Information Plaza, apartment transaction volume in the four Gangnam districts last month (based on contract date) was only 923 cases. This is a slight increase from 783 cases in January but only 38% of the 2,422 cases in November last year before the government's December 16 real estate measures were announced. It is also just over half of the 1,640 cases in December last year. Market insiders explain that even considering the 30 to 60-day lag in reporting actual transactions (from March 13, within 30 days of contract date), the market atmosphere has significantly changed this year. The proportion of transactions in the four Gangnam districts relative to all of Seoul is also decreasing. Until September last year, the transaction share of the four Gangnam districts was 27%, but it sharply declined afterward, shrinking to about 12% and 13% in January and February this year, respectively.

Experts predict that if the COVID-19 situation prolongs amid an already frozen market due to ultra-high-end loan restrictions, the real estate market impact centered on Gangnam will be inevitable. Professor Shim Gyo-eon of Konkuk University's Department of Real Estate said, "If the impact of COVID-19 continues for another three to four months, psychological contraction due to economic recession will cause price adjustments, especially in ultra-high-end homes in Gangnam."

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