January Housing Transactions in Gangnam 4 Districts Down 36%... Impact of High-Intensity Regulations

Apartment complex in Songpa-gu, Seoul.
[Image source=Yonhap News]

[Asia Economy Reporter Lee Chun-hee] Due to the impact of the December 16 real estate measures last year, housing transactions in the Gangnam area plummeted by 36% last month. Overall housing transactions also decreased by 14%. However, compared to January last year, when the 'transaction cliff' occurred due to the September 13, 2018 measures, transaction volume increased.

The Ministry of Land, Infrastructure and Transport and the Korea Appraisal Board announced on the 20th that last month's housing sales transactions totaled 101,334 cases, down 14.4% from 118,415 cases in December last year. This is analyzed as an effect of frozen transactions due to the December 16 measures.

The decrease in transaction volume was clearly seen in Seoul, especially in the Gangnam area. Last month, housing sales transactions in Seoul were 16,834 cases, a 24% decrease compared to 22,156 cases in the previous month. Among them, the Gangnam 4 districts (Gangnam, Seocho, Songpa, Gangdong), which were directly hit by regulations such as the complete ban on mortgage loans for houses over 1.5 billion KRW, saw transactions drop sharply by 35.9% to 3,030 cases from 4,726 cases the previous month.

Transactions in the entire metropolitan area, including Seoul, Incheon, and Gyeonggi, were 55,382 cases, down 11.2% from 62,374 cases the previous month, while transactions in provincial areas decreased by 18.0% to 45,952 cases.

However, compared to January last year, when transaction volume sharply declined due to the September 13, 2018 measures, transaction volume increased. Last month's transaction volume was double the 50,286 cases of the same period last year, and Seoul's transactions surged by 178.7% compared to 6,040 cases in January last year.

A similar trend was observed by type. Last month's apartment transactions were 75,986 cases, down 13.6% from 87,933 cases the previous month. This also represents a 142.7% increase compared to 31,305 cases in January last year. Non-apartment housing transactions last month were 25,348 cases, down 16.8% from the previous month but up 33.5% year-on-year.

The government introduced the December 16 measures last December, considered the strongest real estate regulations ever. The measures included ▲strengthening the loan-to-value ratio (LTV) for mortgage loans on houses priced over 900 million KRW ▲banning mortgage loans for ultra-high-end apartments (1.5 billion KRW) ▲strengthening management of the debt service ratio (DSR) ▲tightening requirements for actual demand in mortgage loans.