Amid Trading Drought, 'Seoul Apartments' Show More Declining Transactions Than Rising Ones

Approximately Four Times More Price-Increase Transactions Compared to Last Year’s Decline

This Year, It Has Dropped to Half the Level

[Asia Economy Reporter Kim Min-young] This year, nationwide apartment transactions showed that price-decrease transactions outnumbered price-increase transactions. In Seoul, the proportion of price-increase transactions was about four times higher than price-decrease transactions last year, but this year it has shrunk to about half the level of price-decrease transactions. Due to the base interest rate hikes and global economic downturn, buying demand has weakened, and the market atmosphere dominated by price-decrease transactions is expected to continue for the time being.

On the 22nd, real estate platform Zigbang analyzed apartment market trends over the past 10 years by comparing “previous transaction prices for the same area” by complex, focusing on the ratio of price-increase and price-decrease transactions. In the first and second quarters of this year, the proportion of price-decrease transactions exceeding ±1% margin of error (stable price) surpassed 40% nationwide and in Seoul. This is the highest level since the first quarter of 2019. As of the ongoing third quarter of this year, the proportion of price-decrease transactions exceeding the margin of error is 48.6% nationwide and 54.7% in Seoul, marking the highest in the past decade.

The proportion of price-increase transactions is on a declining trend. Especially in Seoul, the share of price-increase transactions has rapidly decreased since this year, falling below 50% for the first time since the third quarter of 2019. For the entire year, nationwide apartments recorded 74,842 price-increase transactions and 74,230 price-decrease transactions exceeding the margin of error, showing similar levels. However, in Seoul, there were 2,604 price-increase transactions and 2,722 price-decrease transactions, indicating that price-decrease transactions have overtaken price-increase transactions.

Until last year, both nationwide and Seoul markets had a higher proportion of price-increase transactions than price-decrease transactions. From the third to fourth quarters of 2019 through the third quarter of 2021, the volume of price-increase transactions with prices rising more than 5% compared to the previous transaction greatly exceeded the volume of price-decrease transactions. This trend was analyzed to be due to price increases linked to inflation and strong holding sentiment among apartment buyers. In fact, as of the third quarter of 2021, the ratio of price-increase to price-decrease transactions was 1.8 times nationwide and 3.98 times in Seoul, marking the highest in the past decade. However, as of the third quarter of this year, the ratio of price-increase to price-decrease transactions dropped to 0.81 nationwide and 0.42 in Seoul, significantly reducing the share of price-increase transactions. This means that price-decrease transactions are being recorded more than price-increase transactions.

As long as the base interest rate hikes and the transaction cliff caused by weakened buying demand continue, the current market atmosphere dominated by price-decrease transactions is expected to persist. Ham Young-jin, head of Zigbang Big Data Lab, said, “The recent trend of decreasing transaction volume and increasing proportion of price-decrease transactions can be interpreted as a signal that the apartment market is transitioning into a recession period. Since external conditions surrounding the apartment market, such as high interest rates and economic downturn, remain unfavorable, the current situation of reduced transactions and dominance of price-decrease transactions is expected to continue for the time being.”

Meanwhile, nationwide apartment sales volume has been steadily declining since peaking in 2019?2020. As of the first quarter of 2022, 74,902 transactions nationwide and 3,333 in Seoul were recorded, marking the lowest quarterly figures since 2013. Especially in Seoul, the transaction cliff is considered to have reached a level surpassing the significant drop observed between the fourth quarter of 2018 and the first quarter of 2019.

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