'Regulatory Effect'... Reduction in Apartment Transactions Over 1.5 Billion Won in Gangnam 3 Districts

Loan Restrictions, Increased Property Taxes, and Source of Funds Investigations Pressure Buyers
Meanwhile, the Share of Top 10% Apartment Transactions in Non-Gangnam Areas like Seongdong, Yeongdeungpo, and Dongjak Rises

[Asia Economy Reporter Onyu Lim] In the Seoul apartment market, where price increases were led by the Gangnam 3 districts (Gangnam, Seocho, Songpa) and Yongsan district, the proportion of high-priced housing transactions has significantly decreased. It is interpreted that the strong real estate regulations announced one after another, such as loan restrictions, strengthened property taxes, and investigations into sources of funds, have put pressure on buyers.

On the 20th, Zigbang analyzed actual transaction data of Seoul apartments from just after the December 16, 2020 measures until last month (based on data released on April 16). The proportion of apartments priced over 1.5 billion KRW in Seocho district decreased from 53.8% to 37.5%. This means a drop of 16.3 percentage points in just over three months. Yongsan district also fell by 9.4 percentage points from 32.9% to 23.5%, and Gangnam (61.8% → 53.8%) and Songpa (29.9% → 24.1%) districts decreased by 8 and 5.8 percentage points respectively, showing a more pronounced decline than other autonomous districts.

On the other hand, the proportion of apartments priced between 900 million KRW and 1.5 billion KRW increased in Seocho (32% → 33.2%), Songpa (34.4% → 35.7%), and Yongsan (43.6% → 45.5%) districts, except for Gangnam (27.1% → 22.7%). Until last year, areas with a high proportion of transactions in the 900 million to 1.5 billion KRW price range were Mapo, Dongjak, Seongdong, and Gwangjin districts, but due to the decrease in demand for high-priced housing, the transaction proportion in this range increased in the Gangnam 3 districts and Yongsan district.

Zigbang cited loan regulations, investigations into sources of funds, and the increase in alternative transactions such as gifts as the main reasons for the decrease in the proportion of apartment transactions over 1.5 billion KRW in regions leading the high-priced housing market. In fact, the number of apartment transactions in Seoul where the transaction reason was a gift increased more than twofold from 7,408 cases in 2017 to 15,397 cases in 2018. In 2019, it recorded 12,514 cases.

In terms of proportion, the share of gifts in total transactions was around 2-4% before 2018 but surged to 9.7% in 2019. This trend was especially clear in the Gangnam 3 districts, where high-priced housing is concentrated. The number of gift transactions was 2,041 in 2017, 5,183 in 2018, and 3,130 in 2019, with the proportion peaking at 17.4% in 2018. This year, the gift transaction ratio in the Gangnam 3 districts is in the 13% range. Ham Young-jin, head of Zigbang Big Data Lab, said, "Considering unreported gift-like sales transactions, the actual proportion is expected to be higher than the disclosed figures." Gift-like sales transactions are transactions between related parties, and reporting is possible up to 30% of the highest transaction price in the last three months, with a limit of 300 million KRW.

Although the proportion has decreased, high-priced housing transactions are still centered in the Gangnam 3 districts and Yongsan district. This year, the average transaction price in Gangnam district is 1.6 billion KRW. Seocho district is 1.38 billion KRW, Yongsan district 1.27 billion KRW, and Songpa district 1.12 billion KRW, all exceeding 1 billion KRW.

Ham explained, "Despite targeted regulations aimed at Gangnam, the reason the Gangnam area still maintains high prices seems to stem from reconstruction projects." He added, "Many reconstruction sites that were once popular investment products have raised prices by returning to new constructions after project completion, and other sites awaiting reconstruction are driving market prices up due to speculative expectations."

What is noteworthy is that the regions corresponding to the top 10% of transaction prices have been adjusted. In 2018, apartments in the top 10% price range were mainly traded in affluent areas symbolized by Gangnam (29.3%), Seocho (23.4%), Songpa (17.2%), and Yongsan (8.5%) districts. The combined proportion reached 78.3%. Last year, the combined proportion increased to 86.6%, intensifying the concentration of high-priced housing in these areas.

However, this year, the combined proportion in these areas sharply decreased to 52.4%. Meanwhile, districts leading the non-Gangnam market, such as Seongdong (9.4%), Yeongdeungpo (5.9%), Dongjak (5.2%), and Mapo (5.1%), where newly built apartments have moved in after redevelopment, have become heavily represented among the top 10% transaction price areas.

Ham analyzed, "This suggests the emergence of a new Gangnam." Although Mapo, Seodaemun, Dongjak, and Seongdong districts are in the downtown area or have advantageous access to Gangnam and are located along the Han River, their price levels had fallen short of expectations due to a lack of new apartments. However, with the successive completion of redevelopment projects and the appearance of newly built apartments, these areas are gaining attention as new Gangnam districts.

Ham advised, "Entry barriers due to price differences are gradually increasing, especially along the Han River," adding, "In addition to policies that stabilize prices and lower entry barriers, various policy interventions such as providing residential products that enable social mix seem necessary."

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