As Apartment Loans Tighten... Demand for Villas and Officetels Surges

Fatigue from Soaring Housing Prices, Loan Regulations, and Interest Rate Hikes
Seoul Apartment Sales Supply-Demand Index at 99.6... Selling Pressure Exceeds Buying Pressure
Dropped Below 100 for the First Time Since April This Year
Villa Transactions, an Apartment 'Substitute,' Reach 51,708 from January to September
Apartment Transactions Surpassed for 11 Consecutive Months
Officetel Transactions at Highest Level Since 2006

Apartment complex in the Seoul area (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] Amid a continued transaction freeze caused by the government's real estate loan and tax regulations and fatigue from soaring housing prices, the Seoul real estate market is becoming polarized. While mid-to-low-priced apartments, which were directly hit by loan regulations, saw a significant decrease in transaction volume, low-priced apartments under 600 million KRW and high-priced apartments over 1.5 billion KRW, which were less affected by regulations, experienced relatively smaller declines. Additionally, there is a trend of increasing demand for officetels and villas, which are easier to finance and cheaper than apartments.

According to the Korea Real Estate Board on the 22nd, the apartment sales supply-demand index in Seoul for the third week of November recorded 99.5. This is the first time since April 5th this year (96.1) that the index has fallen below 100 in Seoul. The sales supply-demand index is calculated by analyzing surveys from brokerage offices and the number of online listings to quantify the balance between demand and supply. A value below the baseline of 100 means supply exceeds demand, while a higher value indicates demand exceeds supply. In the Seoul apartment market, this means there are now more sellers than buyers.

This is interpreted as a growing wait-and-see attitude among apartment buyers, influenced by fatigue from the steep rise in housing prices, combined with the government's strengthened loan regulations and interest rate hikes. Song Seung-hyun, CEO of Urban and Economic Research, explained, "With expectations of further tightening of loan regulations and additional base rate hikes, this trend is likely to continue for some time. Especially with the presidential election next year as a variable, many buyers are expected to remain cautious until then."

What stands out is the large disparity in transaction volumes by price range. While transaction volumes of mid-to-low-priced apartments, which are heavily affected by loan regulations, have sharply decreased, the transaction volumes of low-priced apartments under 600 million KRW and high-priced apartments over 1.5 billion KRW, which are not affected by loan regulations, have seen relatively smaller declines. According to the Ministry of Land, Infrastructure and Transport’s actual transaction price data, the number of apartment transactions priced between 600 million and 900 million KRW dropped from 1,362 in August to 735 in September and 405 in October, a decrease of 957 transactions (70.26%) over three months. Transactions for apartments priced between 900 million and 1.5 billion KRW also decreased by 1,005 transactions (69.74%) from 1,441 in August to 861 in September and 436 in October.

On the other hand, low-priced apartments under 600 million KRW decreased by only 339 transactions (40.11%) from 845 to 616 and then 506 during the same period. High-priced apartments over 1.5 billion KRW also saw a relatively smaller decline, dropping by 346 transactions (46.9%) from 738 to 392.

Demand for villas and officetels, considered alternative products to apartments, is also increasing. According to the Korea Real Estate Board’s sales statistics by housing type (based on reporting date), the number of villa sales in Seoul from January to September this year totaled 51,708. This accounts for 49.5% of the total housing sales of 104,492 during the same period. Until last year, apartment transactions outnumbered villas, but this year, villa transactions have surpassed apartments, marking an 11-month consecutive reversal.

The officetel market is also performing well, with this year’s sales volume reaching a record high. According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system, the number of officetel sales nationwide reached 51,402 as of the 10th of this month, the highest since related statistics began in 2006.

CEO Song said, “Villas and officetels are relatively free from loan regulations and have strong substitute characteristics, attracting buyers who feel burdened by purchasing apartments.”

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