Frozen Seoul Real Estate... Brokers Say "Transaction Cliff"

Gangnam Quick Sale Listings Appear but Still Limited
Buyers Seek Even Lower Prices Despite Price Drops
Some Homeowners Start Holding Out
Sellers and Buyers Standoff... Seoul Transaction Volume Declines

[Asia Economy Reporters Moon Jiwon, Lee Chunhee] "There are almost no purchase inquiries. Although prices have dropped slightly, buyers still expect prices to fall further, so transactions are not happening." (Representative of Real Estate Agency A, Mapo-gu, Seoul)

"It seems like there are many listings on the portals, but due to duplicate listings, the actual number is not that high. People who had put their houses up for sale have recently withdrawn their listings, and buyers have completely stopped coming, resulting in a transaction freeze." (Representative of Real Estate Agency B, Yangcheon-gu, Seoul)

The housing market in Seoul has frozen solid due to the economic downturn triggered by the COVID-19 pandemic. With the market already significantly contracted by the December 16 and February 20 policy measures last year and this year, respectively, the economic recession caused by COVID-19 is expected to deliver a shock to the real estate market, leading to a sharp decline in homebuyer sentiment.

According to the real estate industry on the 1st, high-priced apartments in the Gangnam area, where property taxes such as property tax and comprehensive real estate holding tax have increased due to the recent rise in official apartment prices, have seen a significant drop in transactions except for some urgent sales. Both sellers and buyers are maintaining a wait-and-see stance, so most brokerage offices spend the whole day without customers.

Representative of Real Estate Agency C in Gaepo-dong, Gangnam-gu said, "Urgent sales have appeared recently for reconstruction complexes like Eunma Apartment and Gaepo Jugong 1 and 4 complexes, with prices dropping by 200 to 300 million KRW, but there is little change in general apartments. There are not many urgent sales, and even when sales are made, they are rare, so we might have to worry about office rent."

Representative of Real Estate Agency D in Jamsil-dong, Songpa-gu also said, "Inquiries have not completely stopped, but the number of people wanting to buy houses has definitely decreased. After Jamsil Licenz was traded at 1.6 billion KRW recently, everyone is just waiting for prices to fall further, but sellers seem to be holding out."

The Mokdong New Town area in Yangcheon-gu, where expectations for reconstruction are growing, has long been out of listings. For Complex 6, which conditionally passed the detailed safety inspection at the end of last year, there are reportedly fewer than 10 listings out of a total of 1,360 households. The representative of Real Estate Agency B in this area said, "Even if a 115㎡ unit is put up for urgent sale at the low 1.8 billion KRW range, it does not sell. Many people think that since it is over 1.5 billion KRW, loans are not available and prices may fall in the future."

The situation is similar in other areas. Representative of Real Estate Agency A in Mapo-gu said, "I hoped the economy would improve this year, but it seems that housing transactions have completely stalled due to COVID-19."

Seoul's 'transaction cliff' is also reflected in statistics. According to KB Real Estate's March housing market trend survey, the apartment transaction index in Seoul last month was 12.5. Compared to February (24.7), it is half, and compared to December last year (40.2), it has dropped to one-third. The transaction index quantifies the frequency of housing transactions based on surveys of real estate agencies; the higher the number, the more active the transactions.

In particular, the transaction index in Gangnam (11 districts south of the Han River), where high-priced homes are concentrated such as Gangnam, Seocho, and Songpa districts, plummeted from 39.3 in December last year to 10.7 last month. Since opinions on housing prices are still divided, it is analyzed that transactions will remain sluggish for the time being due to a wait-and-see stance between sellers and buyers.

In Gyeonggi Province, some areas such as Gunpo, Guri, and Uiwang are showing strength due to the balloon effect, but overall transactions are sluggish. The transaction index also fell from 47.2 in February to 26.8 last month. Representative of Real Estate Agency E in Gwangmyeong City said, "Homeowners have put up many listings within a month, but since prices have not been lowered, transactions are not many."