Apartment Prices: High-Low Gap Widens in Seoul, Seoul-Province Gap Expands

[Asia Economy Reporter Minyoung Kim] As apartment prices soar in Seoul and the metropolitan area, the polarization of real estate assets between Seoul and other regions is intensifying. While the "height matching" phenomenon among mid- to low-priced apartments in Seoul is becoming more apparent, narrowing the price gap between high-priced and low-priced apartments in Seoul, the asset gap between regions is widening.

According to KB Real Estate's monthly housing price trends on the 3rd, the average price quintile ratio for Seoul apartments last month was 4.1, slightly down from 4.2 a year ago. The quintile ratio is the value obtained by dividing the average price of the top 20% of housing (5th quintile price) by the average price of the bottom 20% (1st quintile price), indicating the price gap between high-priced and low-priced houses. A higher ratio means a greater price difference. The quintile ratio dropped from 5.1 in May 2018 to 4.8 in January last year and has remained around 4.0 to 4.2 this year. This appears to reflect the height matching phenomenon due to the rise in prices of high-end apartments in Seoul. Additionally, the demand is concentrated on mid- to low-priced apartments under 600 million KRW due to the combined effect of rising housing prices in Seoul and strengthened loan regulations, which is also cited as a cause for the reduction in the gap. In fact, as prices of mid- to low-priced apartments rose simultaneously, the average sale price of Seoul apartments last month was 1,216.39 million KRW, up 200 million KRW from a year ago.

On the other hand, nationwide, the gap between high-priced and low-priced apartments is widening further. The nationwide average apartment price quintile ratio increased from 6.9 in January last year to 8.6 last month. This means that it takes the price of 8.6 lower 20% houses to buy one house in the top 20%. The quintile ratio recorded 8.8 from March to June, the highest level since related statistics began in 2008. Since most high-priced apartments are concentrated in Seoul and the metropolitan area, this indicates that the polarization of real estate assets between Seoul and other regions is intensifying. In fact, this month, the average price of 1st quintile apartments in Seoul is 563.36 million KRW, and the 5th quintile is 2,306.73 million KRW. In the six metropolitan cities, the average price of 1st quintile apartments is 138.95 million KRW, and the 5th quintile is 723.98 million KRW, showing a difference of more than three times.

Park Wongap, Senior Real Estate Specialist at KB Kookmin Bank, said, "The increase in the nationwide quintile ratio means that polarization in the nationwide real estate market has worsened," adding, "On the other hand, in Seoul, mid- to low-priced housing prices have risen, leading to upward leveling."

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