"Bear Market Is an Illusion of Fire Sales"... Relaxed Gangnam Homeowners

Sudden Appearance of Below-Market Quick-Sale Properties Spreads Fear of Housing Price Collapse
However, Gangnam 3 Districts Respond with "Just an Isolated Case"... Overinterpretation of Sharp Decline Unwarranted

Panoramic view of the Resentz apartment complex in Jamsil-dong, Songpa-gu, Seoul.

[Asia Economy Reporter Onyu Lim] Recently, a real estate agency near Cheongdam Xi Apartments in Cheongdam-dong, Gangnam-gu, Seoul, posted a new price board showing the price of an 82㎡ (exclusive area) unit changed from 2.45 billion KRW to 2.55 billion KRW. Compared to a recent transaction of the same apartment at 2.39 billion KRW, which was far below the previous actual transaction price, this is 160 million KRW higher. A representative from the agency said, "The owner raised the price because there is no need to rush the sale," adding, "Although many prospective buyers are waiting for prices to drop further amid talks of a real estate downturn, sellers willing to sell significantly below market price are very rare."

According to the real estate industry on the 25th, some properties in the three Gangnam districts have recently appeared as urgent sales at prices several hundred million KRW below market value, increasing anxiety about a potential housing price crash. On the 16th, an 84㎡ unit in Resentz, Jamsil-dong, Songpa-gu, Seoul, was traded at 1.6 billion KRW lower than the market price, at 1.6 billion KRW, and on the 24th of last month, an 84㎡ unit in Banpo Liche, Seocho-gu, Seoul, was sold for 2.42 billion KRW, more than 200 million KRW lower than in December. These developments are attributed to a combination of factors including the December 16 real estate measures, the novel coronavirus disease (COVID-19), and a sharp rise in official property prices, leading to analyses that the previously soaring Gangnam real estate market may be cooling down. Some experts even predict a market crash based on these urgent sales at significantly reduced prices.

According to the Korea Real Estate Board, apartment prices in the Gangnam area recorded negative changes in the third week of March, with Seocho-gu at -0.12%, Gangnam-gu at -0.12%, and Songpa-gu at -0.08%. The recent rapid rise in housing prices seems to have clearly halted.

However, the on-site atmosphere suggests that interpreting this trend as a sharp decline is an overstatement. Although asking prices have slightly dropped recently, frontline real estate offices say this is only a temporary adjustment, not a downturn. A representative from B real estate agency in Apgujeong-dong, Gangnam-gu, said, "Although asking prices have dropped by about 100 million KRW, it cannot be considered a downturn," explaining, "In a downturn, owners typically competitively lower their asking prices." He added, "There are not many listings, and urgent sales are almost nonexistent," and "Properties sold at surprisingly low prices are often special transactions between relatives."

One market expert also said, "In a situation with low transaction volume and the imminent end of the capital gains tax surcharge exemption, the illusion caused by a few cheap urgent sales is misleading," and predicted, "The transaction prices of urgently sold complexes will recover to levels similar to market prices by March."

In fact, looking at actual apartment transaction prices in Gangnam-gu since the 10th, some complexes have seen transaction prices rise in March. For example, a unit on the 2nd floor of Eunma Apartments in Daechi-dong was sold for 1.95 billion KRW, higher than the February highest price of 1.945 billion KRW. Gangnam D'Siang Foret in Suseo-dong was also traded at 1.55 billion KRW, similar to 1.59 billion KRW in December. In other parts of Seoul, except for some urgent sales close to abnormal transactions, March transaction prices fluctuated by only a few tens of millions of KRW compared to February. The brokerage industry expects that although additional cheap urgent sales may appear due to the end of the temporary exemption of capital gains tax surcharge for multiple homeowners at the end of June, these urgent sales will not become a new benchmark for market prices.

Kim Deok-rye, a research fellow at the Korea Research Institute for Housing and Urban Affairs, said, "It is premature to diagnose that a downturn has started just because of some urgent sales in the Gangnam area," adding, "Currently, due to COVID-19, short-term volatility and uncertainty are very high, so it is unclear which direction the real estate market will take."

However, if the economic recession caused by COVID-19 prolongs, it is expected to have an adverse effect on the real estate market. Kim Seong-hwan, a research fellow at the Korea Construction Industry Research Institute, said, "If the real economy recession continues for a long time, it is likely to cause unemployment issues, and many people may find it difficult to repay principal and interest, which could act as a downside factor for the market."

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