Falling Gangnam Area House Prices... Weighing Purchase Decisions Around '1.5 Billion Won' Threshold

Some Jamsil Apartment Sizes Drop Below 1.5 Billion Won KB Prices
Mortgage Loans Now Possible, Buyers Weigh Options
However, Market Impact Expected to Be Limited
Experts Say "COVID-19 Still Ongoing... Transaction Volume May Increase"

[Asia Economy Reporter Moon Jiwon] As prices of some apartment sizes in the major Gangnam area of Seoul fall below the government's "high-priced housing" threshold of 1.5 billion KRW, analysis suggests that buying demand driven by loan effects may revive. Since mortgage loans become available once prices drop below 1.5 billion KRW, this creates a price advantage for actual homebuyers. In fact, there is a noticeable sentiment among buyers weighing purchases mainly of urgent sale properties.

According to industry sources on the 21st, the KB market price general average for Parkrio in Sincheon-dong, Songpa-gu, Seoul, with a 59.86㎡ exclusive area, was recorded at 1.49 billion KRW as of this month. This apartment's price rose to 1.59 billion KRW in December last year but has declined monthly due to government regulations and the impact of COVID-19, falling below 1.5 billion KRW last month.

Currently, in speculative overheated districts, the loan-to-value ratio (LTV) for mortgage loans is 40% for properties valued up to 900 million KRW, and 20% for those between 900 million KRW and 1.5 billion KRW. Loans are completely prohibited for homes exceeding 1.5 billion KRW. Commercial banks use the KB market price general average as the mortgage loan standard. For example, even if the royal floor price exceeds 1.5 billion KRW, loans can be obtained if the general average price of the complex is below 1.5 billion KRW.

An Myung-sook, head of the Real Estate Investment Support Center at Woori Bank, explained, "When calculating mortgage loan standards, we basically refer to the KB market price general average and adjust prices using the floor and unit difference rates from the Korea Appraisal Board. The lowest floors also apply the general average price." In the case of Parkrio, since the 59.95㎡ and 59.64㎡ units also dropped to the 1.4 billion KRW range in January, loans became available for about 1,000 households.

The average price of 1st phase Jangmi Apartment in Sincheon-dong, Songpa-gu, with an 85.88㎡ exclusive area, which was 1.54 billion KRW in December last year, dropped to 1.49 billion KRW in February and currently stands at 1.475 billion KRW. Lake Palace in Jamsil-dong, with a 59.97㎡ exclusive area, rose to 1.54 billion KRW in December last year but fell to 1.5 billion KRW last month.

A representative from real estate agency A in Jamsil-dong said, "Not only Parkrio but also many are watching the KB market price general averages of nearby complexes, waiting for prices to fall below 1.5 billion KRW." It is also known that many buyers who initially planned to purchase smaller units due to high prices are now considering buying larger units as they observe the price decline trend.

In fact, Mapo Raemian Prugio in Mapo-gu, with an 84.38㎡ exclusive area, saw its general average price fall by 15 million KRW this month to 1.565 billion KRW compared to the previous month. Trizium in Jamsil-dong, Songpa-gu, with a 59.88㎡ exclusive area, peaked at 1.63 billion KRW in December last year but has since dropped to 1.62 billion KRW, showing a downward trend.

There are also forecasts that the recent trend of falling sales prices and rising jeonse (long-term deposit lease) prices in Seoul will support an expansion of buying demand. Since the "gap" between sales and jeonse prices narrows, even if loans are unavailable, purchasing a home while holding a jeonse reduces the initial financial burden on buyers. According to the Korea Appraisal Board, the average jeonse-to-sales price ratio for Seoul apartments has been rising this year: 57.24% in January, 57.35% in February, and 57.37% in March. In areas like Nowon-gu, which have many mid-to-low-priced complexes, "gap investment" remains active. If the housing price decline halts, gap investment may increase again in the Gangnam area.

However, experts analyze that the impact on the transaction market will be limited as the COVID-19-induced economic downturn continues and properties near the loan eligibility threshold remain limited. Multi-homeowners cannot obtain mortgage loans regardless of price, and even non-homeowners or single-homeowners are likely to maintain a wait-and-see stance, expecting further price drops.

Ham Young-jin, head of the Big Data Lab at Zigbang, said, "In the short term, this may help partially recover transaction volumes, but without clear signals of overcoming COVID-19 or economic improvement, it is difficult to expect a price increase effect. Since the loan ban itself is a socially sensitive issue, the 1.5 billion KRW threshold can serve as a kind of guideline."

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