Local Big Players "Follow House Prices to Gangnam"

Increase in Non-Local Buyers of Apartments in Gangnam-gu
Taking Advantage of Price Drops Due to Economic Downturn
Proportion of Non-Local Buyers in Seoul Declines for 3 Consecutive Months

[Asia Economy Reporter Moon Jiwon] Mr. A, in his 40s living in Busan, recently purchased an apartment undergoing reconstruction in Gangnam-gu, Seoul. Although he had been interested in Gangnam apartments, he had only placed a purchase waiting order at a nearby real estate agency as he couldn't find the right timing. However, upon noticing that the property he had been closely monitoring had dropped by several hundred million won, he immediately proceeded with the contract. Mr. A said, "Although the real estate market is still not good, I judged that the price had sufficiently dropped," adding, "Since it is a reconstruction project, I also expect capital gains."

Despite the government's strengthened regulations and the economic downturn caused by the COVID-19 pandemic freezing the Seoul apartment sales market, the proportion of local 'big buyers' purchasing apartments in the Gangnam area is actually increasing. Local buyers who had hesitated due to high prices are now moving to capture urgent sales in Gangnam, where prices have recently dropped by several hundred million won.

According to the transaction status by residence of apartment buyers from the Korea Real Estate Board on the 23rd, the proportion of non-residents purchasing apartments in Seoul peaked at 26.11% in December last year but declined for three consecutive months to 24.98% in January, 23.88% in February, and 23.12% in March this year. This is interpreted as a significant decrease in investment-driven non-resident demand due to tightened loan regulations following the December 16 real estate measures last year and the worsening economy caused by COVID-19.

However, even amid this, the proportion of non-resident transactions in the Gangnam 3 districts (Gangnam, Seocho, and Songpa), where high-priced apartment complexes are concentrated, exceeds the Seoul average. The most notable area is Gangnam-gu. The share of non-resident purchases among total apartment purchases was 25.37% in December last year but jumped to 29.39% in February this year and surpassed 30% last month. This means that 3 out of 10 Gangnam apartments were bought by non-residents. This is a clear difference from last year when the proportion was in the mid-20% range.

Seocho-gu's non-resident transaction proportion was 21.75% in January, lower than the Seoul average, but surged to 27.65% in February and 25.85% in March. Songpa-gu also exceeded the Seoul average with 30.12% in January, 29.72% in February, and 28.27% in March. Although the absolute transaction volume has decreased due to the poor market situation, it can be interpreted that local big buyers are emerging as major purchasers of apartments in the Gangnam area.

The industry points to the recent significant price drops in reconstruction project complexes as the background. Mr. A, a representative of a real estate agency in Gaepo-dong, Gangnam-gu, said, "Buyers from local areas such as Busan and Daegu who had been waiting to purchase reconstruction apartments are recently starting to move," adding, "I understand that several contracts have been made in complexes like Gaepo Jugong 1-danji, where urgent sales are appearing." In fact, in Gaepo Jugong 1-danji, urgent sale contracts have been made in the past one or two months with prices dropping by around 200 million won because trading of union member shares is prohibited once the construction report is filed.

The Eunma Apartments in Daechi-dong are also reported to be a major focus. Although there are not many listings yet, urgent sales are considered attractive enough to buy. For the 76.79㎡ (exclusive area) units in this apartment, transactions were made in the mid-1.9 billion won range until last month, but now listings are appearing in the 1.7 billion won range.

Mr. B, residing in Daegu, said, "There is much talk about the reconstruction excess profit recovery system, but I am thinking of buying a reconstruction complex during this opportunity," adding, "I am considering Eunma and Jamsil Jugong 5-danji." A representative of a real estate agency in Daechi-dong said, "Eunma 82㎡ units have also dropped to the 1.8 billion won range," adding, "Transactions are rare for complexes priced over 1.5 billion won because loans are not available, but there are some clients waiting to own a solid property from local areas."

However, there is also a forecast that if the government's real estate regulations are further strengthened, the buying momentum of non-residents for Gangnam apartments may slow down. This is because expectations for reconstruction have diminished following the ruling party's landslide victory in the April 15 general election, and the burden of holding taxes such as comprehensive real estate tax is increasing every year.

An industry insider said, "Except for Eunma, other Gangnam reconstruction complexes cannot yet be considered to have sufficiently dropped compared to the past financial crisis," adding, "I do not recommend immediate purchase."

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