Subtle signs of change are emerging in the apartment market in Seoul's Gangnam area.
In areas where record-high transaction prices were being reported as recently as a month ago,
there are now an increasing number of cases where sellers have cut prices by tens of millions of won, or even more than 100 million won.
As more multi-home owners are putting properties on the market ahead of the resumption of heavy capital gains tax in May, the overall market sentiment is gradually shifting.
"Sold after cutting 100 million won"... Changes in actual transactions in Gangnam
According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 24th,
an 84㎡ exclusive-use apartment at Kyungnam Honoursville in Yeoksam-dong, Gangnam-gu, Seoul, was traded for 1.5 billion won on the 13th of this month.
This is 100 million won lower than the record-high price of 1.6 billion won recorded in December last year.
An 84㎡ exclusive-use unit at Parkrio in Sincheon-dong, Songpa-gu,
was also reported on the 12th of this month at 2.98 billion won, which is 70 million won lower than last month's highest actual transaction price of 3.05 billion won.
As a series of transactions in the Gangnam area are being concluded at prices lowered by tens of millions of won, and in some cases by hundreds of millions of won, some observers interpret this as a sign that "the mood is changing."
However, there is one point that needs to be noted.
For apartment transactions in Seoul, there is a time lag between the signing of the contract by the parties and the actual reporting of the deal.
Since there are still cases of "record-high" transactions that exceed previous peak prices,
it is premature to conclude that the market has completely turned downward.
More listings as heavy capital gains tax resumes
On the 22nd, listings for apartment sales such as urgent sales and ultra-urgent sales were posted at a real estate brokerage office in Gangnam-gu, Seoul. Photo by Yonhap News
원본보기 아이콘President Lee Jaemyung has repeatedly stressed that he will roll back the tax benefits that multi-home owners have enjoyed
and increase what he calls the "cost of holding out."
In particular, with the end of the temporary suspension of heavy capital gains tax approaching in May,
there are signs that multi-home owners are putting properties up for sale to reduce their tax burden.
This trend is also evident on the ground.
An 84㎡ exclusive-use unit at Gaepo Xi Residence in Gaepo-dong, Gangnam-gu, was actually traded for 4.27 billion won in December last year,
but a new listing has recently appeared at 3.7 billion won. The listing description includes the phrase "multi-home owner urgent sale."
Another listing of the same size at 3.75 billion won is labeled "multi-home owner, prime building and floor."
An official at a nearby certified real estate agency said, "Multi-home owners are putting properties on the market after cutting their asking prices by hundreds of millions of won, but actual transactions have not yet taken place," and
"About 90% of prospective buyers are taking a wait-and-see attitude, expecting asking prices to fall further."
In other words, listings are increasing, but buyers are proceeding with caution.
Rise slows... effectively flat
Subtle changes are also visible in price indicators.
According to the Korea Real Estate Board, apartment prices in Gangnam-gu in the third week of February (as of the 16th) rose 0.01% from the previous week.
Given that the increase a week earlier was 0.02%, this is effectively close to a flat trend.
Seocho-gu recorded a 0.05% rise, but this is a sharp slowdown compared with the 0.13% increase in the previous week.
Songpa-gu also saw its rate of increase slow from 0.09% the previous week to 0.06%.
Compared with the 0.15% rise in apartment prices across Seoul as a whole, the upward momentum in the three Gangnam districts has clearly weakened.
Considering that these three districts led the rise in Seoul housing prices last year, this suggests a change in the overall atmosphere.
Listings jump 40%... "waiting supply" piles up
The increase in listings is also confirmed by statistics.
According to real estate big data firm Asil, as of the previous day there were 4,922 apartment sale listings in Songpa-gu,
up about 40% from a month earlier (3,526 listings).
The number of listings in Seongdong-gu rose 50%, in Seocho-gu 22%, and in Gangnam-gu 16%.
In addition to listings aimed at avoiding heavy capital gains tax,
properties are also coming onto the market in anticipation of possible changes to property holding taxes or reductions in the long-term holding special deduction after the local elections in June,
leading to a buildup of "waiting supply."
Outlook: "Unlikely to see a steep decline"
Experts acknowledge the possibility of short-term price adjustments but consider the likelihood of a sharp plunge to be low.
Kwon Youngseon, team leader at Shinhan Bank's Real Estate Investment Advisory Center, said, "As multi-home owners' properties come onto the market until May 9, when the suspension of heavy capital gains tax ends,
there is a possibility that prices will fall and more properties will be listed," but added,
"Since it is not the entire stock of properties in the three Gangnam districts flooding the market, but only some holdings of multi-home owners,
it is hard to see this as a shift to a steep decline."
He also said, "Rather than apartment prices in the three Gangnam districts falling and other areas following suit,
there is a possibility that properties will come onto the market first in areas where multi-home owners are more inclined to sell,
leading to an overall adjustment in real estate prices."
-
Reporter Lee Jungyun leejuyoo@asiae.co.kr
-
Edit Kong Sumin hyunhj@asiae.co.kr
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
