Gangnam 3 Districts Down vs Nodo-gang Up... Apartment Price Trends Similar to Financial Crisis

[Asia Economy Reporter Yuri Kim] In the first quarter of this year, the Seoul Gangnam 3 districts (Gangnam, Seocho, Songpa) saw a significant slowdown in price increases as buying demand sharply contracted due to loan regulations, holding tax burdens, and concerns over an economic downturn. In contrast, areas with mid-to-low priced apartments such as Nowon, Gangbuk, Seongbuk, and Gangbuk experienced relatively larger price increases.

On the 8th, Real Estate 114 analyzed this trend, noting its resemblance to the 2008 global financial crisis period when the Gangnam 3 districts declined while the Nodobang area (Nowon, Dobong, Gangbuk districts) saw price rises.

Comparing the 2008 financial crisis and the current situation, both share the commonality of a real economy recession triggered by external shocks. During the 2008 crisis, apartment prices in the Gangnam 3 districts, which were part of the 'Bubble Seven' areas, dropped significantly, whereas outer Seoul areas like Nodobang continued to rise until just before the Lehman Brothers collapse. From the end of 2007 to August 2008, just before the Lehman event, apartment prices in Seoul rose sharply in Nowon (22.23%), Dobong (21.80%), Jungnang (18.87%), Geumcheon (12.48%), and Gangbuk (12.42%), while Seocho (-1.61%), Songpa (-4.26%), Gangdong (-4.09%), and Gangnam (-2.16%) declined.

Similarly, in the first quarter of this year, areas with mid-to-low priced apartments under 900 million KRW such as Nowon (4.59%), Gangbuk (4.25%), Seongbuk (3.80%), and Dongdaemun (3.44%) led price increases. Dobong also rose by 2.77%, exceeding the Seoul average increase rate of 1.61%. Conversely, high-priced apartment areas like Yongsan (0.25%), Songpa (0.25%), Jongno (0.38%), Seocho (0.42%), and Gangnam (0.65%) saw a significant slowdown in price growth due to loan regulations.

Real Estate 114 stated that since the 2000s, the Bubble Seven and Gangnam area reconstruction markets, which had driven price increases, showed a downward trend from 2007 due to various regulations, with the decline in the Gangnam 3 districts becoming more pronounced in 2008. Meanwhile, demand for small apartments in northern Seoul areas like Nodobang and some northern Gyeonggi regions increased, leading to larger price rises until the first half of 2008, continuing up to just before the Lehman event.

After the inauguration of the Moon Jae-in administration, apartment prices in the Gangnam 3 districts, which had driven the upward trend, turned downward last month due to strong loan regulations, holding tax burdens, and economic recession concerns. In contrast, demand for mid-to-low priced apartments continued in Seoul’s Nodobang, Seongbuk, and Dongdaemun areas, which expanded their price increases even after the COVID-19 pandemic. In Gyeonggi Province, areas such as Suwon, Gunpo, Hwaseong, Uiwang, and Hanam in the southern region, which are non-regulated and undervalued, also saw larger price increases as they caught up.

Lim Byung-chul, Senior Researcher at Real Estate 114, said, "Due to the prolonged economic downturn caused by the COVID-19 impact, concerns are growing, and buying sentiment may weaken not only in the Gangnam area but also in the outskirts of Seoul and Gyeonggi. Additionally, with holding tax burdens, the number of urgent sales by multi-homeowners aiming to benefit from capital gains tax incentives before June is increasing. If these properties remain unsold and accumulate, the price rise led by Nodobang and other outer Seoul areas in the first quarter may also slow down."

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