Single-Family Home Transactions Surge in Seoul as Buyers Turn from Regulated Apartments

Residential houses in downtown Seoul. Photo by Yonhap News

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Unlike apartments, which are generally considered easier to resell, the number of single-family home transactions in Seoul has increased significantly. As regulations on apartments have become stricter, single-family homes are drawing attention as an alternative investment option.

According to the real transaction price disclosure system of the Ministry of Land, Infrastructure and Transport on April 22, the total number of single-family home sales in Seoul during the first quarter of this year was 671. This represents a 19.6% increase compared to 561 transactions during the same period last year.

Single-family homes typically incur higher maintenance costs than apartments and are less secure and convenient, which is why transactions are not as active. As there are fewer buyers, liquidity is also low.

When interest rates increased, the number of single-family home transactions dropped from 852 in the first quarter of 2022 to 387 in the same period of 2023. However, the figure rebounded to 468 in the first quarter of 2024 and has continued to rise steadily through this year.

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The increase in single-family home transactions is mainly due to their growing appeal as investment targets for redevelopment projects. Before the approval of the management disposition plan, single-family homes can be freely bought and sold. Investors are purchasing these homes in anticipation of redevelopment projects. If a home is purchased after the management disposition plan has been approved, the buyer does not inherit association membership and is subject to cash settlement. However, exceptions apply for those who have owned a single home for more than 10 years and lived there for over 5 years, as well as in cases of divorce or emigration, allowing for sales. The Seoul city government's active promotion of "Moa Town" projects, which redevelop aging low-rise residential areas by block, is also cited as a factor boosting investment appeal.

There are also indirect benefits from stricter apartment regulations. Following the real estate regulations announced on October 15 last year, all of Seoul was designated as a land transaction permit zone, and actual residency became mandatory for apartment buyers. In contrast, there is no such requirement for single-family homes, making transactions more flexible.

As a result, high-priced single-family home transactions have been taking place recently. For example, in March, a single-family home in Hannam District 4 of Yongsan-gu, with a land area of 149 square meters, was sold for 5.8 billion won before the approval of the management disposition plan and while the project implementation approval was pending. In April, a single-family home with a land area of 297 square meters in Jayang-dong, Gwangjin-gu, was sold for 6.5 billion won, as redevelopment projects such as Moa Town are underway in the area. On April 7 in Noryangjin District 1 of Dongjak-gu, a single-family home built in 1987 on a 172 square meter lot was sold for 3.29 billion won.

Experts analyze that purchases of single-family homes are being made in anticipation of benefits from redevelopment projects. However, delays in such projects can pose investment risks. Nam Hyukwoo, a real estate researcher at Woori Bank, stated, "If a redevelopment project is halted during progress, liquidity for single-family homes becomes extremely poor," adding, "If you purchase a single-family home in the early stages of a redevelopment area, it can be difficult to sell midway, and if the project fails, you may incur losses."

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