"Seoul Housing Prices Are Falling"... Real Estate Indicators in Unison

Two Months Since the Dec. 16 Measures... Regulatory Effects Begin
Transactions Decline and Outlook Weakens Compared to Before
Seoul Supply and Demand Trends Falling for 8 Consecutive Weeks
Regulations Implemented on the 21st, Further Decline Possible

[Asia Economy Reporter Moon Jiwon] Two months after the announcement of the December 16 real estate measures, analysis suggests that the effects of the regulations are beginning to take hold in the Seoul housing market. Apartment prices are declining mainly in the Gangnam area, the core target of the measures, and the number of people wanting to sell houses is increasing compared to those wanting to buy. It is also expected that investment demand will sharply contract once a dedicated team focusing on investigating illegal real estate activities is launched on the 21st.

According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system on the 18th, the total number of apartment transactions reported in Seoul during the two months following the December 16 announcement last year was only 7,993. This is about one-third of the 22,614 transactions recorded in the two months immediately before the announcement.

During the same period, the proportion of transactions involving high-priced apartments over 900 million KRW also decreased from 16% to 14% compared to a year earlier. Since the December 16 measures focused regulations on high-priced apartments in terms of loans and taxes, buyers appear to be feeling burdened in making transactions. In fact, there was only one transaction of an ultra-high-priced house exceeding 5 billion KRW during this period, compared to five transactions in the same period last year.

There are also forecasts that the contraction in Seoul’s housing transactions will become more pronounced. According to the Korea Real Estate Agency’s apartment supply-demand trend survey for the second week of this month, the indices for Seoul’s downtown and southeastern areas fell below 100 for the first time in 17 and 20 weeks, respectively. An index above 100 indicates more buyers than sellers, while below 100 means more sellers than buyers.

For Seoul’s supply-demand trend, the index exceeded 100 from the third week of October last year and peaked at 120.3 in the third week of December, but has been declining for eight consecutive weeks since the announcement of the measures. The real estate industry analyzes that since apartment prices have shifted to a downward trend mainly in the Gangnam 3 districts (Gangnam, Seocho, and Songpa), Seoul’s supply-demand trend is also likely to turn downward soon.

Currently, the areas where apartment prices have shifted to a downward trend are limited to the Gangnam 3 districts and Yangcheon-gu, but the rate of price increase is slowing in other areas as well. As of last week, Jongno-gu, Gangdong-gu, and Dongjak-gu in Seoul have entered a flat trend, and Gwangjin, Eunpyeong, Seodaemun, Gangseo, Geumcheon, Yeongdeungpo, and Gwanak-gu also recorded a minimal increase of 0.01%. This suggests that the number of districts experiencing a downward trend in apartment prices could increase significantly within one to two weeks.

According to the consumer sentiment survey on the real estate market released yesterday by the Korea Research Institute for Human Settlements’ Real Estate Market Research Center, the consumer sentiment index for Seoul’s housing sales market was 124.5, dropping more than 20 points in one month. This index, expressed on a scale from 0 to 200, indicates that lower values correspond to falling prices and reduced transactions. Last month’s figure was the lowest in the past seven months.

The industry also anticipates that this trend may accelerate around the 21st. From that day, the reporting period for real estate transactions will be shortened from 60 days to 30 days from the contract date, and various collusive acts by homeowners will become punishable under strengthened regulations. In particular, the Ministry of Land, Infrastructure and Transport will launch a 'Real Estate Market Illegal Activity Response Team' directly under the vice minister to focus on monitoring violations of the real transaction law and illegal gifting schemes, which is expected to further freeze transactions.