From Seoul to Gyeonggi-do, Villas Instead of Apartments... 'Old Buildings' Over New Constructions

Seoul apartment exterior./Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Ryu Taemin] The phenomenon of villa (multi-family and row houses) sales volume surpassing apartment sales volume in Seoul has continued for 17 consecutive months. The rapid price surge, interest rate hikes, and strengthened loan regulations have increased the burden of apartment transactions, while relatively affordable villas are attracting demand due to growing expectations for redevelopment projects. It has also been observed that more people are leaving Seoul to purchase relatively affordable apartments in the Gyeonggi area.

Seoul Villa Sales Surpass Apartment Sales for 17 Consecutive Months

According to the Seoul Real Estate Information Plaza on the 14th, last month’s villa sales volume was 3,191 cases, more than double the apartment sales volume of 1,465 cases. Considering the 30-day reporting deadline for transactions, the number of cases may fluctuate, but the trend of villa sales exceeding apartment sales is expected to continue.

Until 2020, apartment transaction volumes in Seoul were higher than those of villas. However, since last year, as Seoul apartment prices soared to unprecedented levels and the threshold for transactions rose, more buyers have turned to relatively affordable villas. Additionally, this year, with the introduction of the Debt Service Ratio (DSR) regulation making it more difficult to obtain loans from financial institutions, villas, which are less affected by loan regulations compared to high-priced Seoul apartments, have become more popular among genuine homebuyers aiming to own a home. In fact, for 17 months starting from January last year, Seoul villa sales volumes have outpaced apartment sales volumes.

Moreover, the recent growing expectations for eased redevelopment regulations have also contributed to the influx of investment demand into villas. Seoul City introduced the Rapid Integrated Planning Private Redevelopment Project last year to expedite private-led development projects. By the end of last year, 21 private redevelopment candidate sites were selected, and a total of 33 sites are currently pursuing rapid integrated planning redevelopment.

From Seoul to Gyeonggi Amid Fatigue Over Soaring Housing Prices

As the entry barrier to Seoul apartments rises, more people are heading to Gyeonggi Province. According to Statistics Korea’s ‘2021 Domestic Population Movement Statistics,’ the net outflow (out-migrants minus in-migrants) from Seoul was 106,243 people. This is an increase of 41,393 people (63.8%) compared to 64,850 in 2020. On the other hand, Gyeonggi saw a net inflow of 150,517 people, with two out of three people (63.8%) leaving Seoul moving to Gyeonggi.

While demand for apartments has been absorbed by Gyeonggi, leading to a sharp decline in apartment sales volume in Seoul, the popularity of apartments in the Gyeonggi area remains high. According to the Gyeonggi Real Estate Portal, last month’s apartment sales volume was 4,967 cases, 1,287 cases more than villa sales (3,680 cases). Unlike Seoul, villas in Gyeonggi have less redevelopment expectations, and the price entry barrier for apartments is not high, so buyers tend to prefer apartments. Additionally, with the ongoing trend of interest rate hikes increasing interest burdens, some are selling their high-loan Seoul apartments and purchasing relatively affordable apartments in Gyeonggi.

‘Old Buildings’ with High Development Expectations More Popular Than Expensive New Constructions

However, recently, the price trends of apartments in Gyeonggi differ depending on whether they are new or old buildings. According to the weekly apartment price trend survey time series statistics by the Korea Real Estate Board, prices of newly constructed apartments (less than 5 years old) in Gyeonggi have fallen for 22 consecutive weeks, accumulating a 2.21% decline this year. This is attributed to fatigue from the rapid price surge since last year and increased recognition of the market peak.

In contrast, prices of apartments over 20 years old rose by 0.41% during the same period. This is believed to be due to relatively lower price burdens and high expectations for redevelopment and remodeling projects, attracting both genuine buyers and investors. Song Seunghyun, CEO of Urban and Economy, stated, “With recent interest rate hikes increasing interest burdens, demand is dispersing from large-scale loans on Seoul apartments to villas or outskirts. This trend is expected to continue for the time being.”

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