Transaction Disappearance, a Signal of House Price Decline?

Declining Transactions and Surge of Low-Priced Listings
Situation Different from Post-Financial Crisis
Future Price Trends Need to Be Monitored

[Image source=Yonhap News]

[Asia Economy reporters Kangwook Cho and Onyu Lim] "Almost all listings have disappeared. As apartment prices keep rising, homeowners often express their intention to sell but then frequently withdraw it." (Representative of A Real Estate Agency in Mapo, Seoul)

As the transaction freeze in the real estate market deepens, attention is focused on the future direction of housing prices. Some predict that the transaction drought amid the government's bubble warnings could signal a decline in housing prices. Typically, housing prices lag behind transaction volumes, and the fatigue from the rapid price surge over a short period leads to decreased transactions, which in turn could trigger a downturn in housing prices. However, market experts generally agree that future price trends need to be observed carefully. They point out that the current situation differs from the post-financial crisis period when low-priced listings surged amid a transaction freeze.

According to real estate big data firm Asil, as of the 9th, among the 25 autonomous districts in Seoul, only two?Gwangjin-gu and Dongdaemun-gu?have seen an increase in apartment listings compared to a month ago. In Mapo-gu, listings decreased by 20% during this period. Other districts such as Songpa-gu (-19.0%), Gangseo-gu (-15.6%), Jung-gu (-13.1%), and Guro-gu (-12.2%) have also experienced sharp declines in listings. This pattern differs from the usual trend where a decrease in transactions leads to an increase in listings and a drop in prices.

The decrease in listings is observed not only in Seoul and the metropolitan area but nationwide. All 17 metropolitan cities and provinces across the country have seen a reduction in listings compared to a month ago. Notably, Gwangju, Incheon, Gangwon, Ulsan, Seoul, Jeonbuk, Gyeonggi, Jeju, and Chungnam have experienced decreases exceeding 10%.

The market still shows a seller's advantage, and most transactions are at record-high prices, which is also noteworthy. According to the Korea Real Estate Board, the apartment sales supply-demand index in Seoul for the first week of August was 107.9, up 0.3 points from the previous week (107.6). This is the highest level in five months since the first week of March (108.5). The sales supply-demand index is calculated by analyzing surveys from member real estate agencies and online listings, quantifying the balance between demand and supply. A value above the baseline of 100 indicates stronger buyer sentiment.

Due to sellers' 'bold asking prices,' record-high prices are emerging in many areas. In places like Dobong and Nowon districts in Seoul and Anyang and Uiwang in Gyeonggi Province, where housing prices have risen sharply recently, asking prices are often raised by at least 50 million KRW and sometimes over 100 million KRW compared to previous highs. A representative from a real estate agency in Changdong said, "As prices continue to rise and buyer inquiries persist, sellers refuse to sell unless it is at a record-high price."

For this reason, experts analyze that the recent transaction freeze should be viewed differently from the 2008 global financial crisis when housing prices fell. After the financial crisis in September 2008, apartment transaction volumes plummeted to around 1,500 units over four months, leading to price declines.

In contrast, the recent transaction slowdown is occurring amid a sharp decrease in supply relative to demand, which could potentially fuel further price surges.

Professor Shim Kyo-eon of Konkuk University's Department of Real Estate explained, "With strong expectations of rising prices, the government itself has caused a listing and transaction freeze by tightening regulations on multi-homeowners, including capital gains tax burdens. The few listings that do appear are traded at record-high prices, continuously stimulating housing prices."

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