Buying Frenzy for Villas 'Eligible for Gap Investment'

Multifamily and Row House Transactions Total 7,008
Highest in 12 Years... Concentrated in Eunpyeong and Gangseo

[Asia Economy Reporter Donghyun Choi] As Seoul apartment prices and jeonse prices soar, investment sentiment is shifting to relatively affordable multi-family and row houses (hereinafter referred to as "villa"). Since regulations have been focused on apartments, as a reflective effect, villa transaction volume has reached the highest level in 12 years.

According to the Seoul Real Estate Information Plaza on the 18th, the provisional number of villa transactions in Seoul last month was 7,008. This is the highest level in 12 years since April 2008, when there were 7,686 transactions. This year, Seoul villa transaction volumes were below 5,000 with 3,840 in January, 4,800 in February, 3,609 in March, 4,061 in April, and 4,665 in May, but surged to 6,328 in June and surpassed 7,000 last month. Since contracts from last month are counted until the end of this month due to the 30-day reporting deadline, the transaction volume for July is expected to increase further.

By district, transactions were concentrated mainly in the outskirts of Seoul, such as Eunpyeong-gu with 814 cases (11.6%) and Gangseo-gu with 798 cases (11.4%). Yangcheon-gu, which includes the preferred school district Mokdong (500 cases), and Gangbuk-gu, a major redevelopment area (434 cases), also had high transaction volumes. Among the Gangnam 3 districts (Seocho, Gangnam, Songpa), Songpa-gu had 377 cases, Seocho-gu 284 cases, and Gangnam-gu 142 cases, in that order.

Looking at actual transaction status, many places saw price increases surpassing apartment levels. Daewon Yeonrip in Bulgwang-dong, Eunpyeong-gu, built in 1979, had eight transactions exceeding 1.5 billion KRW last month alone. There were no recorded transactions for 2 years and 4 months from February 2018 to last June, but suddenly many occurred. A 77.19㎡ (exclusive area) unit was sold for 1.5 billion KRW on the 29th of last month, and another transaction took place the next day at 1.6 billion KRW. A representative from real estate agency A in Bulgwang-dong said, "Daewon Yeonrip is a high-priced villa located in the Yeonsinnae Station commercial district. It is famous for having almost no listings, but many buyers willing to pay high prices have appeared since the second half of this year." In Gangbuk-gu, a 37.02㎡ unit in Gwangseong Villa, Mia-dong, was traded for 210 million KRW on the 8th of last month and then sold for 285 million KRW on the 21st of the same month. A representative from real estate agency B in Mia-dong explained, "Recently, there have been many investment inquiries centered on redevelopment areas. Since investment is possible with about 100 to 200 million KRW, interest among young people is also high."

The rise in villa transactions and prices appears to be because the government's successive housing market regulations have been concentrated on apartments. In the June 17 measures, the government restricted jeonse loan financing for apartments priced over 300 million KRW in regulated areas, but villas were not subject to this. It is still possible to make 'gap investments' by taking out jeonse loans. Also, in the July 10 measures, the housing rental business registration system was significantly revised, but villas, one-room units, officetels, etc., will continue to receive tax benefits such as capital gains tax reductions, so investment demand may shift. Professor Daejung Kwon of Myongji University's Department of Real Estate said, "Due to market liquidity and the sharp rise in apartment holding taxes, villa prices are likely to rise. Since villas are home to many low-income and housing-vulnerable groups, the government should devote more effort to prevent balloon effects."

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