2·4 Measures Freeze... Cooling Demand for Seoul Villas

Concerns Grow Over Cash Settlement in Public Development
February Multi-family and Row House Transactions Down 43% from Previous Month
General Redevelopment and Villa Demand Persist in Auction Market

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] Since the 2·4 real estate measures, the buying momentum for multi-family and row houses (villas) in the Seoul area has cooled down. This appears to be due to psychological contraction stemming from concerns that new buyers may face cash liquidation instead of receiving apartments if the area is designated as a public direct redevelopment zone. However, demand for villas remains active in general redevelopment shares excluding public direct implementation projects and in the court auction market.

According to the Seoul Real Estate Government Plaza on the 10th, the number of multi-family and row house sales transactions in Seoul in February was 3,368 (based on reports as of the 10th), a sharp drop of 42.5% (2,491 transactions) compared to 5,859 in the previous month. Since the actual transaction reporting period is 30 days, the real transaction volume may be higher, but the downward trend is clear.

The decrease in Seoul multi-family and row house transactions is interpreted as an aftermath of the 2·4 measures, which focus on government-led urban development and maintenance projects. The government decided that for houses newly purchased after February 5, if they fall within the public direct redevelopment areas to be selected later, priority supply rights will not be granted and cash liquidation will be applied.

Uncertainty increased as anti-speculation measures were implemented without confirming project sites, causing multi-family and row house transactions to shrink. A representative from a real estate agency in Dongdaemun-gu, A, said, "Transactions are not happening because there is a risk of becoming a 'muldakji' (cash liquidation without occupancy rights)," adding, "The government’s designation of villas as cash liquidation targets without confirming project sites has frozen the villa market."

The Seoul villa market had been booming until recently. It was chosen as an alternative to apartments amid severe jeonse (long-term deposit lease) difficulties, and a public redevelopment boom centered on aging residential areas pushed transaction volumes to 7,558 in July last year. Following the announcement of the first and upcoming second public redevelopment candidate sites, buying enthusiasm continued through December last year and January this year. The atmosphere changed drastically after the 2·4 measures.

The changed atmosphere is also reflected in price changes. According to the Korea Real Estate Board’s February nationwide housing price trend survey, the sales price index for row houses in Seoul rose by 0.29%, down 1.2 percentage points from 0.41% in the previous month.

However, villas remain popular in the general redevelopment market where there is no risk of cash liquidation. A representative from a real estate agency in Noryangjin-dong, Dongjak-gu, B, said, "Since the 3·5 district recently received project implementation approval, premiums have generally risen," adding, "As general redevelopment properties become scarcer, there are no listings available below an initial investment of 1 billion KRW."

The villa fever continues in the auction market as well. According to the Gigi Auction February auction trend report, the average bid-to-price ratio for Seoul villas was 93.1%, up 8 percentage points from 85.1% the previous month. This is the highest figure in 4 years and 7 months since July 2016’s 93.2%. Myungwon Oh, a researcher at Gigi Auction, explained, "Since auctions allow for low-price purchases, it seems that even if cash liquidation occurs, buyers calculate that it is not a loss."

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