Severe Seoul Housing Transaction Cliff... Dead End for Genuine Buyers

Apartment, townhouse, and multi-family sales as well as Jeonse and monthly rent transactions hit bottom
House prices continue to rise amid a shortage of listings
Compounded by tightening loan restrictions

[Asia Economy Reporter Onyu Lim] This month, the transaction freeze in the Seoul housing market is becoming severe. Not only apartments but also row houses and multi-family homes (commonly called villas) are shrinking to the lowest levels of sales and jeonse/monthly rent transactions this year. In particular, concerns are spreading that real demand buyers are being cornered as house prices continue to rise despite the disappearance of transactions, compounded by the government's loan regulations.

According to the Seoul Real Estate Information Plaza on the 25th, the reported apartment sales transactions this month so far amounted to only 994 cases. Although there are monthly fluctuations, compared to the steady transaction volume of around 4,000 cases since the beginning of this year, this figure has shrunk to about one-quarter. The highest monthly apartment transaction volume in Seoul this year was 5,796 cases in January, and the recent three months' transaction volumes were △ May 4,797 △ June 3,936 △ July 4,469.

The atmosphere for row houses and multi-family homes, which experienced panic buying due to rising apartment prices, is the same. The sales transaction volume in August was 1,342 cases, a completely different atmosphere from the previous boom when it recorded 4,000 to 6,000 cases.

Jeonse and monthly rent transactions have also sharply declined. Apartment jeonse and monthly rent transactions in August stand at 7,749 cases. This is a different pattern from before, when it maintained between 12,000 and 16,000 cases every month since the beginning of the year. Row houses and multi-family homes also maintained transaction volumes of 8,000 to 9,000 cases (January to July) but dropped to 4,070 cases in August, about half the previous level.

Since there is still about a week left in August and the transaction reporting period is within 30 days from the contract date, the transaction volume is likely to increase from now. However, considering the current trend, it is expected that both sales and jeonse/monthly rent transactions of apartments and villas in Seoul will record the lowest figures this year.

The all-around decrease in Seoul housing transaction volume is partly due to the summer vacation season, but analysis suggests that the main cause is the shortage of listings caused by the government's strengthened regulations. In fact, since June, when the heavy taxation on multi-homeowners' holding tax and capital gains tax began in earnest, the number of listings in the market has clearly decreased. Jeonse listings have also become chronically scarce following the implementation of the new Housing Lease Protection Act, including the right to request contract renewal and the jeonse/monthly rent price ceiling system.

Recently, the government's household loan restrictions seem to be further fueling the transaction freeze. Last month, household loan balances in the banking sector alone surged by 9.7 trillion won, and as the upward trend did not subside, the authorities demanded strong total loan volume management measures from the financial sector. Accordingly, NH Nonghyup Bank, Woori Bank, SC First Bank, and others recently restricted or suspended some household loan products. Ham Young-jin, head of the Zigbang Big Data Lab, predicted, "If the financial sector strengthens the debt service ratio (DSR) regulations per borrower due to the possibility of interest rate hikes, the transaction freeze phenomenon could worsen."

However, despite the transaction freeze, house prices are still soaring. A 59㎡ unit in Hillstate Sangdo Central Park, Sangdo-dong, Dongjak-gu, changed hands for 1.4 billion won on the 13th. This is 110 million won higher than the actual transaction price at the end of July.

A 59㎡ unit in Junggye Green 1 Complex, Junggye-dong, Nowon-gu, was also traded for 780 million won on the 6th, up 60 million won from April. A representative from a real estate agency in Nowon-gu said, "Listings are scarce, but as house prices rise, anxiety among real demand buyers is growing, and price increases continue mainly in mid- to low-priced complexes."

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