Real Estate Market Slump... 'Small Apartments' Are Selling Well

Apartment Sales Ratio for Units Under 60m² at 52.8%

Higher Interest Rates Lead to Increased Small Unit Sales Ratio

With Continued Household Fragmentation, Single-Person Households Account for 41% This Year,

[Asia Economy Reporter Kim Min-young] The proportion of small apartment transactions has exceeded 50% for the first time in 14 years since the 2008 financial crisis. This is believed to be due to increased demand for small apartments as the burden of financing has grown amid interest rate hikes and loan regulations.

According to an analysis by real estate information company Real House of apartment sales transaction data from the Korea Real Estate Board, the nationwide sales ratio of apartments under 60㎡ from January to May this year reached 52.8%. The sales ratio for apartments under 60㎡ was 52.74% in 2008, when the global financial crisis occurred (annual basis), then declined to around 40% between 2018 and 2020, before surpassing 50% for the first time in 14 years this year.

Demand for smaller homes is expected to continue increasing. With the implementation of the DSR3 stage, obtaining loans has become more difficult, and interest rate hikes are expected to further increase interest burdens.

In fact, in 2008, when the small unit transaction ratio was highest, loan interest rates (based on Bank of Korea KOSIS data) soared to 7.17%, while in 2020, when loan interest rates hit a record low of 2.8%, the small unit transaction ratio was also at its lowest at 39.1%.

The rise in single-person households is also one of the reasons for the increased popularity of small units. According to data from the Ministry of the Interior and Safety, the proportion of single-person households reached 41% in June this year, an increase of 430,000 from last year. Statistics Korea’s projections estimate that the average household size will decrease to 1.91 persons in 30 years, with single-person households continuing to increase steadily.

Kim Sun-ah, head of the sales analysis team at Real House, said, "If the small apartment rental business registration system currently under review is reinstated, tax benefits such as reductions in capital gains tax and property tax are expected." She added, "If the system is revived, demand aiming for rental income and capital gains will increase, further boosting the popularity of small apartments."

Meanwhile, due to the interest rate hikes dampening buyer sentiment, Seoul apartment prices have turned downward for the first time in 3 years and 1 month according to private statistics.

According to KB Real Estate, as of the 18th, Seoul apartment sales prices fell by 0.02% compared to the previous week. This marks the first negative figure in 3 years and 1 month since June 10, 2019 (-0.01%). According to the Korea Real Estate Board, Seoul apartment sales prices have recorded negative growth for eight consecutive weeks from May 30 (-0.01%) to July 18 (-0.05%).

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