Demand for lower-mid priced apartments in Seoul is increasing, driving up the average sales price. This trend contrasts with last year's surge in high-end apartment prices, which has recently entered an adjustment phase due to lending restrictions. The market anticipates that this "gap-closing" trend will continue for the time being.

According to the KB Real Estate Monthly Time Series Statistics released on March 6, the average sale price of apartments in the 20th to 40th percentile (second quintile) in Seoul last month was KRW 810.38 million. The average price for these second-quintile apartments in Seoul first surpassed KRW 800 million in May 2021 (KRW 812.01 million), but fell back to the KRW 700 million range in January 2023, remaining flat for an extended period. However, after the lending restrictions implemented on June 27 last year, prices have steadily risen, returning to the KRW 800 million range for the first time in about three years.

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The price increase has also outpaced that of the top 20% (fifth quintile) high-end apartments. Last month, the average sale price of the top 20% apartments was KRW 3,471.2 million, rising only 0.15% compared to the previous month. In contrast, apartments in the 20th to 40th percentile rose by 1.4%, marking a relatively larger increase.

In Seoul’s outskirts, numerous complexes that hovered in the KRW 700 million range in the first half of last year have set new record-high prices above KRW 900 million since the start of this year. According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system, a 59-square-meter unit (Samho 3rd complex) in Wolgye Siyoung Apartments-a major redevelopment complex in Nowon District-was sold for KRW 1.1 billion on the 10th of last month, setting a new record. After setting a record at KRW 980 million in January, the price jumped KRW 120 million in just one month.

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The 49-square-meter unit at Gangbyeon 3rd Complex in Gayang-dong, Gangseo District also set a new record last month with a transaction at KRW 950 million. This complex had been trading in the KRW 600-700 million range for about three years from 2023, but surpassed KRW 800 million in March last year and has continued to rise. There are now listings with asking prices as high as KRW 1.3 billion. At Gwanak Woosung, a large complex of 1,597 units in Gwanak District, a 59-square-meter unit was also sold for KRW 960 million last month, up by about KRW 100 million in just one month. This complex also traded in the KRW 700 million range over the past three years, but broke the KRW 900 million mark for the first time this year.

The market views the strong demand for lower-mid priced apartments as a result of the government's strict lending regulations and the impact of the rental housing shortage. The June 27 lending regulations capped home mortgage loans at KRW 600 million and reduced the loan-to-value (LTV) ratio to 40%, leading buyers with limited cash to turn their attention to cost-effective properties under KRW 1 billion.

Apartment complexes are densely packed throughout the city as seen from the Namsan Observatory in Seoul. Photo by Yonhap News

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The share of lower-mid priced apartments in overall apartment transactions in Seoul is also increasing. Last month, transactions for apartments priced between KRW 500 million and KRW 1 billion accounted for 1,687 out of 3,473 total sales in Seoul, or 48.5% of the market-an increase of 4.5 percentage points from the previous month. In contrast, the share of transactions for apartments priced between KRW 1.5 billion and KRW 2 billion (323 transactions) dropped to 9.3%, down by 2.4 percentage points over the same period.

Kim Hyosun, Chief Real Estate Specialist at KB Kookmin Bank, said, "With the market shifting to focus on end-users due to regulations on multiple homeowners, apartments priced under KRW 1 billion remain relatively accessible despite the lending restrictions." She added, "Renters feeling housing uncertainty due to the rental shortage are entering the market as buyers, thereby driving up the prices of lower-mid priced apartments."

Experts expect the current upward trend focusing on lower-mid priced apartments to continue for the time being. Since these properties saw relatively slower price increases compared to high-end apartments last year, further price gains in the form of “gap-closing” are expected. With the expiration of the capital gains tax increase grace period on May 9, it is anticipated that listings from multiple homeowners will decrease, leading to additional price increases.

Yoon Sumin, Real Estate Specialist at NH Nonghyup Bank, said, "Since the 10·15 Measures, lower-mid priced apartment listings have declined, so if listings from multiple homeowners decrease further after May 9, asking prices could continue to rise due to reduced supply."

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