Weak Gangnam Area Reconstruction... Eunma and Jamsil5 Asking Prices 'Plummet'

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[Asia Economy Reporter Onyu Lim] The prices of reconstruction apartments in the Gangnam area of Seoul, such as Jamsil Jugong Complex 5 and Eunma Apartment, are noticeably declining amid strong real estate regulations and the economic downturn caused by COVID-19. This follows the ruling party's landslide victory in the April 15 general election, which had been strengthening reconstruction regulations like the excess profit recovery system, leading to a series of "disappointment sales." The fact that the capital gains tax surcharge exemption period for multi-homeowners ends at the end of June is also significantly impacting the lowering of asking prices.

According to the real estate industry on the 26th, on the 24th, an 84㎡ (exclusive area) unit in Eunma Apartment, Gangnam-gu, Seoul, was listed as a quick sale at 1.87 billion KRW. Despite being a high-floor, south-facing, remodeled unit on the 11th floor, the asking price dropped by nearly 500 million KRW compared to the record high of 2.35 billion KRW registered in December last year.

Eunma Apartment, a representative reconstruction complex in Gangnam, has recently seen listings below 2 billion KRW in the past month or two, and asking prices have continued to decline after the general election. The steep decline is due to sluggish transactions. According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, there were no registered sales transactions for Eunma Apartment last month. A real estate agent near Eunma Apartment explained, "People who want to sell their homes by the end of June to benefit from the capital gains tax exemption for multi-homeowners are putting out quick sale listings, but the real estate market atmosphere has cooled down, and loans (over 1.5 billion KRW) are also blocked, so transactions are not going well."

The situation is similar in Jamsil Jugong Complex 5 in Songpa-gu, another Gangnam reconstruction complex. The lowest asking price for an 82㎡ unit dropped from 2.05 billion KRW on the 10th to 2.02 billion KRW on the 17th, and further down to 1.95 billion KRW on the 26th. This is more than a 500 million KRW drop compared to the record high of 2.4 billion KRW registered in December last year. A maintenance industry official said, "In the case of reconstruction, the investment tendency is strong, but as the real estate market atmosphere worsens, sellers are rushing to dispose of their properties."

Experts expect the decline in asking prices that started with Gangnam reconstruction apartments to spread to non-Gangnam areas. Kim Eun-jin, head of the research team at Real Estate 114, said, "The downward trend that began with Seoul reconstruction apartments is expanding to general apartments as well as non-Gangnam areas such as Yongsan and Yeongdeungpo," adding, "The areas that saw the most rapid price increases during the uptrend have now become the leading areas in the decline." He further noted, "This trend is expected to accelerate for the time being," explaining, "Because the ruling party's landslide victory in the general election means that speculative demand regulations focusing on loans, taxes, subscription, and source of funds investigations are likely to continue throughout this year."

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