"Seoul Reconstruction Sees Largest Weekly Drop in 7 Years"…Suwon and Yongin Show Clear Slowdown in Growth Rates

[Asia Economy Reporter Yuri Kim] This week, the sale prices of reconstruction apartments in Seoul fell by 0.31%. This is the largest weekly decline in seven years since June 2013. Despite the interest rate cuts and the government's three-month postponement of the application of the private land sale price ceiling system, the market seems to be more affected by the economic downturn caused by the novel coronavirus infection (COVID-19). The decline trend is led by reconstruction projects and the 'Gangnam 4 districts' of Gangnam, Seocho, Songpa, and Gangdong. While major areas in Gyeonggi and Incheon such as Suwon, Yongin, and Seongnam (Suyongseong) maintain an upward trend, the rate of increase is clearly slowing down.

According to Real Estate 114 on the 3rd, the apartment sale prices in Seoul fell by 0.03% this week, marking a decline for two consecutive weeks. Reconstruction apartments dropped by 0.31%, whereas general apartments rose by 0.02%. New towns and Gyeonggi/Incheon areas increased by 0.02% and 0.07%, respectively.

In Seoul, the decline in the Gangnam 4 districts, where reconstruction projects are concentrated, is deepening. As the possibility of an economic recession rises, the reconstruction market, which has strong investment characteristics and is heavily regulated by the government, is the first to be hit. There are also some signs that the downward trend in reconstruction complexes is spreading to general apartments. The decline was in the order of Gangnam (-0.21%), Gangdong (-0.17%), Songpa (-0.16%), and Seocho (-0.07%).

In Gangnam, Gaepo Jugong 6 Complex in Gaepo-dong and Eunma in Daechi-dong fell by 15 million to 85 million KRW. In Songpa, Asia Athlete Village and Jugong 5 Complex in Jamsil-dong dropped by 20 million to 75 million KRW. In Seocho, Jugong 1 Complex in Banpo-dong and Sinbanpo 2nd Complex in Jamwon-dong decreased by 25 million KRW. On the other hand, non-Gangnam areas with many mid-to-low priced apartments such as Guro (0.19%), Nowon (0.11%), Gwanak (0.11%), Gangseo (0.09%), Seongbuk (0.08%), and Seodaemun (0.08%) continued to rise. In Guro, Shingu-ro Xi in Guro-dong and Daerim 2nd Complex in Sindorim-dong increased by 5 million to 20 million KRW. In Nowon, Surak River City 3 and 4 Complexes in Sanggye-dong rose by 5 million to 10 million KRW.

New towns rose in the order of Jungdong (0.05%), Pyeongchon (0.04%), Sanbon (0.03%), Ilsan (0.02%), Dongtan (0.02%), and Bundang (0.01%). The advancement of new towns such as Jungdong, Sanbon, and Ilsan, which had relatively small increases until now, was remarkable. In Jungdong, Bandal Geukdong and Bandal Samik in Sangdong rose by 10 million KRW. In Pyeongchon, Hyangchon Hyundai 4th Complex in Pyeongchon-dong and Gongjak Booyoung in Gwanyang-dong increased by 5 million KRW. In Sanbon, Gaya 5th Jugong 1st Complex in Sanbon-dong and Chungmu 2nd Jugong Complex in Geumjeong-dong rose by 5 million to 10 million KRW.

Gyeonggi and Incheon rose in the order of Seongnam (0.16%), Gwacheon (0.15%), Bucheon (0.12%), Gwangmyeong (0.10%), Gunpo (0.09%), Yongin (0.09%), Suwon (0.08%), Uiwang (0.08%), and Incheon (0.07%).

The jeonse (long-term deposit lease) market is seeing an increase in renewals by existing tenants despite somewhat higher prices due to social distancing and the spring moving season. Seoul's jeonse prices rose by 0.05%, with an increased rate compared to the previous week. New towns and Gyeonggi/Incheon rose by 0.01% and 0.02%, respectively.

In Seoul's jeonse market, demand is moving mainly around renewals, and there are not many listings. The rise was in the order of Geumcheon (0.18%), Gangseo (0.16%), Gangdong (0.15%), Guro (0.10%), Seodaemun (0.10%), and Seongbuk (0.10%). In new towns, Bundang (0.04%) and Ilsan (0.01%) rose, while Wirye fell by 0.03%. Other new towns remained mostly flat. In Gyeonggi/Incheon, Incheon (0.06%), Paju (0.05%), Uiwang (0.04%), Osan (0.04%), Ansan (0.02%), Yongin (0.02%), and Gunpo (0.01%) rose.

Yoon Ji-hae, chief researcher at Real Estate 114, said, "The economic contraction that started with COVID-19 is putting pressure on the real economy, and the decline in reconstruction, which is sensitive to economic fluctuations, is serious. Purchase demand has shrunk due to loan regulations, increased holding taxes (officially assessed prices), and strengthened proof of funds. Also, with the expiration of the capital gains tax increase exemption period scheduled for the first half of the year approaching in about two months, the supply of properties from multi-homeowners may increase."

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