[Apartment Official Price Announcement] Seoul Apartment Official Prices Rise Most in 13 Years... Impact of Concentrated Increase in High-Value Homes

This Year's Seoul Apartment Officially Announced Price Increase Rate 14.75%
Highest Since 2007... Three Consecutive Years of Double-Digit Growth Since 2017

Government Focused on Raising High-Value Apartment Official Prices by Introducing 'Alpha Value'

By District, Gangnam 3 Districts and Yangcheon-gu Lead... Gangnam-gu Up 25.6%

▲ 2020 Seoul Autonomous Districts Apartment Official Price Increase Rates (Provided by Ministry of Land, Infrastructure and Transport)

[Asia Economy Reporter Lee Chun-hee] The publicly announced prices of apartments and other multi-family housing in Seoul are expected to record the largest increase in 13 years. Although the nationwide increase rate remained at the usual level of around 5%, this year the government focused on raising the realization rate of high-priced housing, causing the publicly announced prices in the Gangnam 3 districts?Gangnam, Seocho, and Songpa?and Yangcheon district, where high-priced housing is concentrated, to rise significantly, thereby increasing the overall rise in Seoul.

The Ministry of Land, Infrastructure and Transport announced on the 18th that from midnight on the 19th, it will disclose the publicly announced prices of 13.83 million multi-family housing units nationwide as of January 1 this year and begin listening to owners' opinions.

The increase rate of publicly announced prices for multi-family housing in Seoul was 14.75%. This is 0.74 percentage points higher than last year's 14.01%, marking the highest level in 13 years since 28.4% was recorded in 2007. It is more than twice the nationwide increase rate of 5.99%, showing the highest increase rate in the country.

The publicly announced prices of multi-family housing in Seoul fell by 6.3% in 2009 due to the financial crisis, then briefly rose by 6.9% the following year. However, from 2011 to 2014, they declined for four consecutive years. The full recovery began in 2015, with a 2.4% increase that year, followed by 6.2% in 2016 and 8.12% in 2017, gradually accelerating. The upward trend continued with 10.19% in 2018 and 14.01% last year, marking two consecutive years of double-digit increases. Including this year, it will be three consecutive years of double-digit growth.

▲ 2020 Apartment Officially Announced Price Calculation Method (Provided by Ministry of Land, Infrastructure and Transport)

The high increase rate in Seoul this year appears to be largely influenced by the government's policy to raise the realization rate of publicly announced prices. Through the '2020 Real Estate Price Announcement and Public Price Reliability Enhancement Plan' announced in December last year, the government announced the introduction of an 'α value' to improve the realization rate in the price calculation process this year. A ceiling of 70% is set for properties priced between 900 million KRW and less than 1.5 billion KRW, 75% for those between 1.5 billion KRW and less than 3 billion KRW, and 80% for those above 3 billion KRW. If the realization rate does not meet these thresholds, the α value will be added to raise the realization rate.

Accordingly, the expected increase rates of publicly announced prices for multi-family housing this year by price range are as follows: 27.39% for 3 billion KRW and above, 26.18% for 1.5 billion KRW to less than 3 billion KRW, 17.27% for 1.2 billion KRW to less than 1.5 billion KRW, 15.2% for 900 million KRW to less than 1.2 billion KRW, 8.52% for 600 million KRW to less than 900 million KRW, 8.52% for 300 million KRW to less than 600 million KRW, 3.93% for 300 million KRW to less than 600 million KRW, and -1.90% for less than 300 million KRW, showing higher increases in higher price ranges.

Among the 6,264 multi-family housing units nationwide priced at 3 billion KRW or more, 6,243 units (99.7%) are concentrated in Seoul. Among 87,635 units priced between 1.5 billion KRW and less than 3 billion KRW, 85,880 units (98.0%) are in Seoul, and among 91,115 units priced between 1.2 billion KRW and less than 1.5 billion KRW, 84,613 units (92.9%) are also in Seoul. This concentration of high-priced housing explains why Seoul's increase rate in publicly announced prices was the highest nationwide due to the focus on realizing high-priced housing prices.

The pattern by autonomous district was similar. The increase in publicly announced prices within Seoul was concentrated in districts with dense high-priced housing such as the Gangnam 3 districts and Yangcheon district. Gangnam district recorded a staggering increase rate of 25.57%. Seocho district followed with 22.57%, and Songpa district with 18.45%, ranking the Gangnam 3 districts first to third. Yangcheon district ranked fourth with 18.36%. These four districts also ranked first to fourth among all basic local governments nationwide.

Additionally, Yeongdeungpo district (16.81%), Mapo district (12.31%), Yongsan district (14.51%), and Seongdong district (16.25%), collectively known as 'Yeongmayongseong,' also showed high increase rates. Among the 25 autonomous districts in Seoul, only three districts?Gangbuk (4.10%), Gangseo (5.16%), and Eunpyeong (5.51%)?showed increase rates lower than the national average of 5.99%.

The Ministry of Land plans to finalize and announce the publicly announced prices on the 29th of next month after listening to owners' opinions and deliberation by the Central Real Estate Price Public Announcement Committee. The expected publicly announced prices for each housing unit can be viewed on the Real Estate Public Price Information website from midnight on the 19th, and at the civil service offices of the city, county, or district where the housing is located from the 19th until the 8th of next month.

If there are any opinions, owners can submit written statements by the 8th of next month via the Real Estate Public Price Information website, the city/county/district offices, or the Korea Appraisal Board. Subsequently, objections will be accepted from the 29th of next month until May 29th, and the final adjusted prices will be announced at the end of June.