Seoul's Top 20% Housing Prices Decline... Nationwide Housing Price Polarization Hits Record High

Seoul Apartment Quintile Declines for 3 Consecutive Months
Prices Drop Due to Surge of Urgent Sales in Gangnam
However, Nationwide Polarization Rapidly Increases
Balloon Effect Impacts Key Areas in Gyeonggi Province

[Asia Economy Reporter Moon Jiwon] Due to the government's strong real estate regulatory policies, the average apartment price of the top 20% in the Seoul area turned to a decline last month. The quintile ratio, an index indicating the polarization of apartment prices in Seoul, also showed a decrease for three consecutive months this year. However, the price gap between high-priced and low-priced apartments nationwide widened to the largest level in about nine years. This is interpreted as the Seoul housing prices stagnating while apartment prices in the metropolitan area, such as Gyeonggi-do, surged due to a 'balloon effect.'

According to the monthly housing price trend time series data from KB Kookmin Bank on the 8th, the apartment price of the top 20% in Seoul last month was 1,807.94 million KRW, slightly down from the previous month (1,813.04 million KRW). This is the first decline in the top 20% apartment prices in Seoul in five months since November last year. The recent influx of urgent sale properties in the Gangnam area with prices lowered by several hundred million won seems to have influenced the deepening downward trend.

Accordingly, Seoul's quintile ratio also stood at 4.59, the lowest figure in 10 months since June last year. The quintile ratio is the value obtained by dividing the average price of the top 20% (5th quintile) housing by the average price of the bottom 20% (1st quintile). A higher index means a larger price gap between high-priced and low-priced houses.

Seoul's quintile ratio rose to 4.76 in January this year due to the rapid price increase centered on the Gangnam area last year but has been declining for three consecutive months since then. This is because, while the prices of mid-to-low-priced complexes under 900 million KRW have risen due to the December 16 real estate measures and the increase in official prices, the prices of high-priced houses are gradually falling.

However, the nationwide apartment quintile ratio recorded 7.34 last month, the highest in 9 years and 8 months since August 2010 (7.39). When the Moon Jae-in administration took office in May 2017, this index was around 4.7 but rose to an all-time high level within three years. In fact, the nationwide bottom 20% apartment prices decreased from 118.37 million KRW at the beginning of the administration to 108.54 million KRW currently, while the top 20% increased by 42% from 560.78 million KRW to 797.63 million KRW during the same period.

The recent worsening of nationwide residential polarization appears to be due to the 'balloon effect' in Gyeonggi-do and some metropolitan cities. In the case of Gyeonggi-do, the average apartment price of the top 20% rose by 18.6 million KRW over the past year but surged by more than 68 million KRW in just four months this year. This is due to liquidity concentrating in major Gyeonggi areas such as Suwon, Yongin, Hwaseong, and Gunpo amid the real estate market slump in Seoul. The quintile ratio in Gyeonggi-do sharply rose from 3.9 in December last year to 4.3 last month.

Industry insiders analyze that the top 20% housing prices in Seoul, which turned to a decline this month, may find it difficult to maintain stability for a long time. According to a survey by the Korea Real Estate Board, apartment prices in the Gangnam 4 districts (Gangnam, Seocho, Songpa, Gangdong) showed a narrowing decline from -0.21% last week to -0.17%. An industry official said, "Some urgent sale properties were traded during the holiday period, causing actual transaction prices and asking prices to rise," adding, "However, since it cannot yet be said that the urgent sale properties have ended, we need to observe a little longer."

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