Price Over Location: "Home Buying with a Bargain Hunter Mindset"

Continued Downtrend... Price Adjustment Range Larger in New Constructions than Reconstruction
Current Real Estate Market Focuses More on Price Competition than Location
Invest in Areas with Significant Price Drops

[Asia Economy Reporter Minyoung Kim] Due to the easing of government regulations, there is a growing argument that attention should be paid to newly built apartments, which have experienced larger price adjustments, rather than older complexes with smaller price declines. While reconstruction projects are considered policy beneficiaries and thus lack significant price merits, newly built apartments have undergone substantial price corrections, presenting opportunities for low-cost purchases. For this reason, Won-gap Park, Senior Real Estate Specialist at KB Kookmin Bank, advises that the current real estate market is more of a price war than a location competition, so investors should select and invest in areas with temporarily steep price drops.

[Image source=Yonhap News]

On the 24th, Senior Real Estate Specialist Won-gap Park suggested, "It might be better to shift focus to newly built apartments, which have experienced more severe price declines, rather than reconstruction projects that lack significant price merits." He added, "The approach to the current real estate market should be that of a bargain hunter, selecting and investing in areas with temporarily steep price drops." This implies that homebuyers without sufficient funds should prioritize price competitiveness over location when aiming to purchase a home during a downturn.

Looking at the statistics, newly built apartments have notably declined more than reconstruction projects during this downturn. According to the Korea Real Estate Board's apartment sales price index by age, as of last month, the sales price index for apartments in Seoul aged 5 years or less was 93.9, down 2.14 points from 96.04 in December last year. During the same period, quasi-new apartments aged over 5 to 10 years dropped 1.68 points from 96.21 to 94.54. Apartments aged over 10 to 15 years fell 1.9 points from 96.64 to 94.75, those aged over 15 to 20 years decreased 1.37 points from 96.6 to 95.23, and complexes over 20 years old saw a 1.78-point drop from 96.24 to 94.46. Amid the ongoing price decline, newly built apartments in the metropolitan area have experienced larger drops than older apartments. This is analyzed as reflecting the fact that newly built apartments rose sharply during the real estate boom, resulting in larger corrections.

For example, an 84㎡ unit in Helio City, Garak-dong, Songpa-gu (completed in 2018), sold for 1.86 billion KRW (33rd floor) in November last year but was traded for 1.6 billion KRW (34th floor) in December, dropping over 200 million KRW in just one month. In contrast, reconstruction complexes in the same Songpa-gu, which recently received official reconstruction approval from the Songpa District Office, showed a downward trend at the end of the year but prices began to rise again at the start of the year. This appears to reflect expectations of regulatory easing. For instance, Olympic Family Town in Munjeong-dong sold for 1.41 billion KRW (9th floor) in November last year, then changed hands for 1.34 billion KRW (15th floor) in December. However, in January this year, it sold for 1.52 billion KRW (5th floor), rising 180 million KRW in just one month.

Park stated, "Compared to past upturns, reconstruction projects rose less and also fell less during downturns. If reconstruction prices had fallen more than newly built apartments, it might be worth investing despite the burden charge risks, but if not, it is better to reconsider."

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