Where Are Seoul Housing Prices Headed? "Bottoming Out vs. Inevitable Further Decline"

Rapid Clearance of Gangnam Urgent Sales to Avoid Property Tax
Seoul Apartment Price Decline Slows for 2 Consecutive Weeks
Analysis of Bottoming Out After Falling to Low Point
However, Further Decline Possible Due to Strong Government Regulations
Weak Stability Expected Amid Seller-Buyer Cautiousness

[Asia Economy Reporter Moon Jiwon] Although Seoul apartment prices have been declining for seven consecutive weeks, the rate of decline is decreasing, leading to mixed analyses regarding future housing price trends. As most of the urgent sales to avoid holding taxes have been completed, some analyses suggest that apartment prices are forming a bottom. However, there are also considerable forecasts that additional declines are inevitable due to the impact of the real economy downturn. Experts predict that cautious behavior between sellers and buyers will intensify, resulting in a mildly weak market continuing until the end of the year.

◆End of Holding Tax Avoidance Transactions... Bottoming Out in Gangnam Area?= According to industry sources on the 18th, Seoul apartment prices have recently shown signs of slowing their downward trend in both public and private statistics. According to the Korea Real Estate Board survey, Seoul apartment prices turned negative on March 30 and experienced a steep decline for four weeks until the 27th of last month, but the rate of decline has narrowed for two consecutive weeks recently. The decline rate of apartment prices in the Gangnam 3 districts (Gangnam, Seocho, Songpa), which serve as a leading indicator for nationwide housing prices, also eased from -0.19% last week to -0.13% this week.

In private survey data from Real Estate 114, last week Seoul apartment prices fell by 0.01% compared to the previous week (-0.04%), reducing the rate of decline. This is interpreted as being influenced by a significant reduction in the decline rate of reconstruction complexes, which had led to price stabilization due to urgent sales priced several hundred million won below recent market prices (-0.13% → -0.05%). In fact, the asking price for the 76㎡ unit (exclusive area) of Eunma in Daechi-dong, known as the flagship reconstruction complex in Gangnam, was in the mid-1.7 billion won range at the end of last month but has risen to 1.85 to 1.9 billion won currently.

As urgent sales to avoid holding taxes such as property tax and comprehensive real estate tax were virtually completed ahead of the imposition date of June 1, analyses suggest that the 'bottoming out' of housing prices has begun. Kim Eun-jin, head of the research team at Real Estate 114, stated, "Urgent sales in the Gangnam area have been absorbed since May," and diagnosed, "It can be seen that housing prices have formed a bottom." Ahn Myung-sook, head of the Real Estate Support Center at Woori Bank, also said, "Although it depends on changes in the real economy, the fear among homeowners has significantly weakened," and predicted, "Since additional urgent sales are not coming out much, once the urgent sales to avoid holding taxes are all sold, the market will enter a phase of power struggle."

◆Concerns of Further Decline Due to Increasing Regulatory Intensity= However, in the market, there are also considerable forecasts that the downward trend will continue for some time as the government has announced additional real estate regulatory policies. Earlier, on the 15th, Kim Yong-beom, First Vice Minister of Strategy and Finance, held a 'Real Estate Market Inspection Meeting' at the Government Seoul Office and emphasized again, "There are still market instability factors such as abundant liquidity, low interest rates, and speculative demand targeting regulatory loopholes," and "The government's determination to stabilize the real estate market is firm."

In fact, the government has been increasing market regulation intensity, such as designating the area near the Yongsan Maintenance Depot site in Seoul, where buying sentiment was concentrated after the recent 5th and 6th metropolitan area supply plans, as a land transaction permission zone. This is interpreted as a government signal that it will not tolerate housing price increases. The government also plans to accelerate the passage of amendments to the Comprehensive Real Estate Tax Act, Income Tax Act, Housing Act, Local Tax Special Cases Act, and Special Act on Sensitive Rental Housing in the National Assembly.

There is also an opinion that the real estate market, which is affected later than the stock market during economic recessions, may see a full-fledged decline later. The Korea Real Estate Board stated, "Although there was an upward movement as urgent sales were absorbed in some Seoul complexes, there was no follow-up buying," and "Overall, inquiries from buyers are decreasing."

◆Supply is the Key= The housing supply outlook is not bad either. According to the Ministry of Land, Infrastructure and Transport, the annual average housing supply in the metropolitan area over the next three years is 224,000 units. Narrowing the target to apartments, 161,000 units will be supplied annually, which is 12.7% more than the average of the past 10 years. The government’s policy is to supply more than 250,000 units plus alpha annually, exceeding new housing demand in the metropolitan area by more than 30,000 units even after 2023. In particular, the government plans to eliminate supply shortage concerns by introducing a pre-sale system centered on the 3rd new towns such as Namyangju Wangsuk and Hanam Gyosan. The pre-sale volume next year is expected to reach 9,000 units.

Park Won-gap, senior real estate specialist at KB Kookmin Bank, said, "Although the rate of decline is slowing statistically, it does not seem to have much significance," and predicted, "Due to increased uncertainty in the economy caused by COVID-19, tax regulations, and loan pressures, the real estate market will continue to see transaction contraction until the end of the year."

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