Homes Once Priced at 700 Million Now Hit 900 Million... Seoul's Mid- to Low-Priced Apartment Prices Surge [Real Estate AtoZ]

As demand for mid- to low-priced apartments in Seoul increases, the average sale price is also on an upward trend. This movement contrasts with the recent adjustment phase of high-priced apartments, which had driven last year's home price surge but are now affected by stricter lending regulations, among other factors. The market expects this “gap-narrowing” trend to continue for the time being.

According to KB Real Estate's monthly time series statistics released on March 6, the average sale price for apartments in the 20th to 40th percentile range (second quintile) in Seoul last month was 810.38 million won. The average price for second-quintile apartments in Seoul first surpassed the 800 million won mark in May 2021 (812.01 million won), before falling back to the 700 million won range in January 2023. After a prolonged period of stagnation, prices began to rise again following the lending restrictions implemented on June 27 last year, and have now returned to the 800 million won level for the first time in about three years.

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The monthly price increase for these apartments has also surpassed that of the top 20% (fifth quintile) of high-priced apartments. Last month, the average sale price for the top 20% of apartments was 3.4712 billion won, a mere 0.15% increase from the previous month. In contrast, apartments in the 20th to 40th percentile rose by 1.4%, showing a relatively greater increase.

In the outskirts of Seoul, there have been numerous cases this year where apartment complexes that remained in the 700 million won range during the first half of last year are now setting new record highs above 900 million won. According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system, the Wolgye Siyoung Apartments (Miryung, Miseong, Samho 3rd) in Nowon District-a representative redevelopment complex-set a record on February 10, with a 59-square-meter (Samho 3rd) unit sold for 1.1 billion won. This is a jump of 120 million won in just one month, after the previous record of 980 million won was set in January.

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Similarly, a 49-square-meter unit in Gangbyeon 3rd Complex, Gayang-dong, Gangseo District, was traded at a record-high price of 950 million won last month. This complex hovered in the 600 to 700 million won range for about three years starting in 2023, but has continued to rise since surpassing the 800 million won mark in March last year. Currently, some listings are asking for up to 1.3 billion won. At Gwanak Woosung, a large complex with 1,597 units in Gwanak District, a 59-square-meter unit was also traded at 960 million won last month, rising by about 100 million won in just one month. This complex, too, had seen transactions in the 700 million won range for the past three years but has surpassed the 900 million won threshold for the first time this year.

The market views the strong performance of mid- to low-priced apartments as a result of the government’s stringent lending regulations and the ongoing rental crisis. The June 27 lending restrictions, which set a maximum housing loan limit of 600 million won and reduced the loan-to-value (LTV) ratio to 40%, have led buyers with limited cash resources to turn their attention to value-for-money listings priced under 1 billion won.

The proportion of mid- to low-priced apartments among all sales transactions in Seoul is also increasing. Last month, out of 3,473 apartment sale transactions in Seoul, 1,687 were for apartments priced between 500 million and 1 billion won-accounting for 48.5%, a 4.5 percentage point increase from the previous month. In contrast, transactions for apartments priced between 1.5 and 2 billion won (323 cases) accounted for 9.3%, a 2.4 percentage point decrease over the same period.

Hyosun Kim, Chief Real Estate Specialist at KB Kookmin Bank, explained, "In a market that has shifted to focus on real demand due to regulations on multiple homeowners, apartments priced under 1 billion won are considered relatively accessible despite the lending restrictions. Tenants feeling housing instability due to the rental crisis are choosing to buy, which is pushing up the prices of mid- to low-priced apartments."

Experts anticipate the current upward trend centered on mid- to low-priced apartments will continue for the time being. Since price increases in this segment have lagged behind those of high-priced apartments, there are expectations that prices will keep rising in a gap-narrowing fashion. As the temporary suspension of heavy capital gains tax ends on May 9, it is anticipated that listings from multiple home owners will decrease, leading to further price increases.

Sumin Yoon, Real Estate Specialist at NH Nonghyup Bank, stated, "Since the supply of mid- to low-priced apartment listings has already declined after the October 15 policy, if listings from multiple homeowners decrease further after May 9, reduced supply could continue to drive up asking prices."

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