Top 50 'Daejangju Apartments' Also Declined

High-End Apartment Prices in Gangnam and Yongsan Fall for the First Time in 2 Years and 2 Months
KB Leading Apartment 50 Index Drops 0.24% to 101.18 This Month

Apgujeong Hyundai Apartment Photo by Hyunmin Kim kimhyun81@

[Asia Economy Reporter Ryu Taemin] Apartment prices in the so-called ‘leading districts’ such as Gangnam and Yongsan in Seoul have turned downward for the first time in 2 years and 2 months. As the housing market freezes due to economic contraction, ultra-high-end apartments in the Gangnam area are no longer considered safe assets, and the recent tax reform plan is believed to have further reduced their popularity.

According to KB Real Estate on the 25th, the ‘KB Leading Apartment 50 Index’ for this month stood at 101.18, down 0.24% from the previous month. This marks a 0.30 percentage point decrease from last month’s increase rate (0.06%), turning negative for the first time since May 2020 (-0.64%), after 2 years and 2 months. The KB Leading Apartment Index selects the top 50 apartment complexes nationwide by market capitalization and indicates the rate of change in market capitalization. It is highly sensitive to price fluctuations and is mainly used as a leading indicator to forecast the housing market.

The index maintained an average monthly increase of around 1% from June to November last year. However, it dropped to the 0% range starting in December, when the housing market began to freeze. In particular, it sharply declined to 0.09% in February, marking the lowest level in 21 months, and further fell to 0.06% last month. The Leading 50 Index includes high-priced reconstruction complexes in Seoul such as Eunma, Apgujeong Hyundai, Jamsil Jugong in Gangnam, as well as Mapo Raemian Prugio and Mokdong New Town.

This downward turn is due to the continued decline in the Gangnam area, where high-priced apartments are concentrated. According to the Korea Real Estate Board’s weekly apartment price trend survey, the apartment price change rate in Gangnam-gu turned negative this month, recording three consecutive weeks of decline. In Songpa-gu, the downward trend has continued for nine consecutive weeks since the third week of May, and Gangdong-gu has seen a 0.17% drop over six consecutive weeks of decline.

There have also been falling transactions in various places. According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system on the same day, a 157.36㎡ (exclusive area) unit in Apgujeong-dong Hyundai Apartment 7th Complex in Gangnam-gu was sold for 5.5 billion KRW on the 9th of last month. This price is 300 million KRW lower than the record price (5.8 billion KRW) for the same area sold in Hyundai 6th Complex the previous month. A 164㎡ unit in Tower Palace, Dogok-dong, Gangnam-gu was traded for 4.25 billion KRW on the 29th of last month, 100 million KRW lower than the record price, and a 59㎡ unit in Raemian Blestige, Gaepo-dong was sold for 2.14 billion KRW on the 28th of last month, 145 million KRW lower than the previous high price.

Demand Hesitates Due to Tax Reform Plan, Weakening Perception as Safe Asset

The significant decline in the growth rate of this index, which includes many high-priced apartments in Gangnam, is interpreted as a sign that demand for ‘smart single-home ownership’ is also hesitating. Industry experts explain that the perception that high-priced apartments are no longer safe assets has strengthened due to the contraction of the real estate market.

Moreover, the recent government plan to impose comprehensive real estate tax based on housing prices rather than the number of houses seems to have further dampened buying sentiment. On the 21st, the government announced a tax reform plan that shifts the comprehensive real estate tax system from the number of houses to a value-based system and abolishes the heavy tax rate for multi-homeowners.

In fact, according to the Korea Real Estate Board, the Seoul apartment sales supply-demand index this week was 85.7, down 0.7 points from last week’s 86.4. This is the lowest figure since the fourth week of July 2019 (87.2). Especially in the southeastern region, which includes the four Gangnam districts, the index fell 5.1 points from 97.0 in May to 91.9 in the third week of July, marking a decline over two months.

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