Strong Wait-and-See Sentiment... Gangbuk Buying Demand Hits Lowest in 7 Years and 6 Months

Buyers Burdened by Loan Interest Rates
Once Booming Nodobang and Mayongsung
House Price Rise Expectations Also Diminished
Listings Increase but Transactions Remain Dry
"Cautious Market Expected to Continue in Second Half"

[Asia Economy Reporter Hwang Seoyul] Apartment buying demand in the Gangbuk area of Seoul has dropped to its lowest level in 7 years and 6 months. Although the number of listings has increased, transactions are mainly happening through urgent sales, causing sale prices to decline. The market expects that with reduced hopes for house price increases and growing concerns over interest rate hikes, a wait-and-see stance will continue in the second half of the year.

According to the weekly KB Housing Market Trends on the 20th, the buyer dominance index in the Gangbuk area recorded 34.5 in the second week of June. This is the lowest since the fourth week of December 2014 (34.0). The buyer dominance index ranges from 0 to 200, with values above 100 indicating ‘more buyers’ and below 100 indicating ‘more sellers.’

Until last year, the Gangbuk area was known by districts such as No·Do·Gang (Nowon, Dobong, Gangbuk-gu) and Ma·Yong·Seong (Mapo, Yongsan, Seongdong-gu), where buying demand surged amid expectations of rising house prices. In the first week of July 2020, the buyer dominance index was 160.8, about 4.6 times higher than last week’s figure. Buying demand remained strong until the second week of August last year, recording 109.5, but the index sharply declined from the end of last year and has not exceeded the 70 mark since the fourth week of October.

This appears to be due to increased borrowing costs for buyers caused by the base interest rate hikes. The COFIX (Cost of Funds Index), which serves as the benchmark for variable interest rates on mortgage loans, also rose by 0.14 percentage points to 1.98 in May compared to the previous month. According to the Seoul Real Estate Information Plaza, the total number of transactions in Gangbuk autonomous districts in April was 861, less than half of last year’s 1,758 transactions.

Apartments in the Nowon-gu area / Photo by Yonhap News

In particular, examining No·Do·Gang, listings have increased before and after the base interest rate hikes, but transactions have not occurred. This area had many properties priced below 900 million KRW, which is the LTV (Loan to Value) 40% eligibility threshold, and below 600 million KRW, qualifying for the government’s Bogeumjari loan, making it a region with strong ‘all-in’ buying demand at one time. According to the real estate big data company Asil, compared to April 14, when the base interest rate was raised by 0.25 percentage points, listings in Dobong-gu increased by 13.4%, Nowon-gu by 11.0%, and Gangbuk-gu by 10.4% as of April 18. However, the number of sales transactions in Nowon-gu decreased from 392 in April last year to 145, Dobong-gu from 190 to 61, and Gangbuk-gu from 62 to 35.

With transaction contraction, sales are mainly happening through urgent sales, leading to a downward trend in sale prices. According to the weekly real estate trend report by the Korea Real Estate Board, this week, except for Yongsan, which has development prospects (+0.01%), all areas in Gangbuk showed a decline in the sale price index compared to the previous week.

For example, Seongnim Apartment in Sanggye-dong, Nowon-gu (84.5㎡) was sold for 520 million KRW on the 10th of this month, 35 million KRW lower than the previous actual transaction price of 555 million KRW in June last year. Similarly, Gyeongnam Honorsville in Mia-dong, Gangbuk-gu (84.873㎡) was traded last month at 900 million KRW, 44 million KRW lower than the previous actual transaction price of 944 million KRW in August last year. The head of A Real Estate Agency in Sanggye-dong, Nowon-gu said, "Buyer sentiment is completely dead, and transactions are almost non-existent," adding, "Buyers and sellers have different standards for urgent sale prices, so even urgent sales are not going through well."

Park Won-gap, Senior Real Estate Specialist at KB Real Estate, said, "Prices in the Gangbuk area surged rapidly over the past 2-3 years, so buyers’ expectations for price increases have diminished," and added, "Although LTV easing is anticipated, the burden of interest rate hikes means a wait-and-see stance will continue for some time."

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