"If Bought Last Month, Mental Breakdown"...Are Regional Housing Prices Deflating Too?

Price Drops in Various Local Areas Including Busan and Gwangju
Sales Mainly Through Quick Sales as Buying Demand Decreases
Local Pre-sale Fever Cools... Forecasts Plummet

Real estate listings posted at licensed real estate offices in Seoul [Image source=Yonhap News]

Recently, cases of actual transactions occurring at prices several tens of millions of won lower than the record highs have been emerging one after another in major apartment complexes in provincial areas that had been maintaining record-high transactions until recently. As real estate buying demand weakens and transactions in the Seoul metropolitan area freeze up, the downward pressure is more pronounced in provincial areas with a weaker real demand base. In particular, in provincial areas, the enthusiasm for pre-sale, which peaked earlier this year, is cooling down sharply, raising concerns that the market may freeze rapidly.

According to the real estate industry and the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 10th, transactions in apartment complexes across the country, including Busan, Chungbuk, and Gyeongbuk, have recently increased at prices several tens of millions of won lower than previous high prices. Although some direct transactions suspected to be special transactions such as family gifts exist, most transactions are conducted through licensed real estate agents, indicating that the price decline sentiment is gradually spreading.

For example, a 60㎡ (exclusive area) unit in Shingaegum LG in Busanjin-gu, Busan, was traded for 330 million won on the 5th of last month but was actually traded for 280 million won on the 3rd of this month, dropping 50 million won in one month. Currently, listings in this complex are priced around 340 million won, but it is reported that transactions are mainly happening with urgent sales that significantly lower the price.

The Cheongju River Park Xi 84㎡ in Heungdeok-gu, Cheongju, where housing prices surged last year due to favorable factors such as the attraction of a multipurpose synchrotron accelerator, was traded for 454 million won on the 3rd, down 26 million won compared to the transaction on the 27th of last month (480 million won). Additionally, units such as Baekseok Byeoksan Blooming 119㎡ in Seobuk-gu, Cheonan, and Gaon Village 59㎡ in Dajeong-dong, Sejong, have also recently dropped about 70 to 90 million won compared to their record-high prices.

This atmosphere is somewhat different compared to early to mid-last month when buying demand concentrated in provincial areas while the Seoul metropolitan area’s upward trend stalled. Many opinions online also express concerns about a declining market. Mr. A, residing in Gyeonggi-do, said, "The same size and type unit was actually traded for 80 million won cheaper than the previous market price," adding, "Those who bought at the record high last month probably purchased for upgrading or actual residence, but seeing the actual transaction price must have caused a 'mental breakdown'."

Low-priced apartments with official prices under 100 million won, which are exempt from acquisition tax surcharges, still attract strong interest, but there are opinions that this too may slow down due to government regulations. On the 28th of last month, Minister of Land, Infrastructure and Transport Noh Hyung-wook warned provincial speculation, stating at a press briefing, "There are cases where some individuals or corporations are accumulating properties to avoid acquisition tax and capital gains tax surcharges, so I believe a fact-finding survey and regulatory measures are necessary."

The outlook for the provincial pre-sale market is also deteriorating. According to the Housing Industry Research Institute’s November Housing Sale Sentiment Index (HSSI) released the day before, the Seoul metropolitan area maintained levels between 90 and 100, similar to the previous month, while provincial metropolitan cities and other provincial areas generally declined, showing levels between 60 and 80. This index, calculated through surveys of about 500 construction companies, uses 100 as a baseline, with values below 100 indicating a negative sales outlook.

The institute stated, "There is a sharp decline centered on provincial metropolitan cities such as Sejong, Gwangju, and Busan," adding, "It is necessary to prepare response measures to market changes through detailed supply and demand diagnosis and market monitoring."

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