Despite Ban on Mortgage Loans Over 1.5 Billion Won... Seoul Apartment Prices Rose Further

Apartment Purchase Demand Concentrates on Units Priced Below 1.5 Billion KRW

High-End Apartment Price Surge Remains Unchecked

[Asia Economy Reporter Kim Min-young] It has been two years since the government implemented the December 16th measures that completely banned mortgage loans for high-priced homes, but not only has it failed to curb apartment prices in the Gangnam area, the demand has shifted to mid- to low-priced apartments, resulting in a balloon effect.

According to KB Real Estate on the 15th, the average apartment sale price in Seoul, which was 859.51 million KRW in December 2019, rose to 1.23729 billion KRW last month, marking a 43% increase over two years. December 2019 was when the government announced a complete ban on mortgage loans for home purchases exceeding 1.5 billion KRW. Although the government introduced strong measures to cut off funding as housing prices soared, the demand shifted to apartments priced below 1.5 billion KRW, which ironically only raised the average apartment sale price in Seoul.

The upward trend in high-end apartment prices also did not stop. According to Real Estate R114, the average sale price of apartments larger than 85㎡ (exclusive area) in Seoul was 1.48 billion KRW in December 2019, but last month this price rose about 26% to 1.88 billion KRW. The price of apartments in the top 20% (5th quintile) in Seoul also jumped from 1.896 billion KRW to 2.488 billion KRW during the same period.

Apartment prices in Gangnam-gu, where high-end apartments are concentrated, also soared further. The apartment sale price index in Gangnam-gu, Seoul, which was 104.6 at the time of the policy announcement, rose 22% to 127.7. The average sale price of large apartments in Gangnam-gu also increased by about 500 million KRW, from 2.6 billion KRW to 3.1 billion KRW. The statistics confirm that the strengthened loan measures have been ineffective in controlling housing prices.

In particular, since the government authorities implemented comprehensive loan tightening measures from September, there have been criticisms that the polarization between high-end and low-end apartments has only intensified. According to monthly time series data from KB Kookmin Bank, the sale price per 3.3㎡ of 5th quintile apartments in Seoul last month was 24.882 million KRW, up from 24.428 million KRW in September. Meanwhile, the average price of apartments in the bottom 20% fell from 8.892 million KRW to 8.796 million KRW during the same period. The price gap ratio between high-end and low-end housing in the 5th quintile expanded from 2.7 to 2.8.

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