Will 'Seoul Apartment Prices' Fall Further or Rise... Experts Say "Sharp Rebound Difficult"

Decline Narrowing in Korea Real Estate Agency Statistics
Real Estate 114 Reports Seoul Apartment Prices Rise After 9 Weeks
However, Follow-up Buying Remains Quiet... Economic Recession Persists
Macroeconomic Uncertainty Grows... Structure Makes Sharp Rebound Difficult

Apartments in Seocho-gu, Seoul appear hazy due to fine dust. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] There are conflicting forecasts on whether Seoul apartment prices, which have been stagnant due to the economic downturn caused by the novel coronavirus infection (COVID-19), will rebound or continue to fall.

Some analyses suggest that the market may enter a recovery phase as many urgent sales in the Gangnam area of Seoul for tax-saving purposes have been transacted, but since follow-up buying is quiet and the economy is still not good, many believe that real estate investment demand will be hard to revive in the short term.

Looking at the results of public and private real estate statistical surveys on the 30th, Seoul apartment prices showed some recovery in the last week of this month. According to the Korea Real Estate Board, as of the 25th, Seoul apartment prices fell by 0.02% compared to the previous week (-0.04%), narrowing the decline.

Seoul apartment prices have been falling for nine consecutive weeks since the end of March, but the decline has been shrinking over the past five weeks: -0.07% → -0.06% → -0.04% → -0.04% → -0.02%.

The Korea Real Estate Board explained, "The decline narrowed slightly mainly in some areas where development benefits such as the groundbreaking of the Samsung-dong Global Business Center (GBC) exist or urgent sales have been exhausted." Buying sentiment has concentrated on mid-to-low-priced complexes under 900 million won, leading some northern districts like Dongjak-gu to shift to an upward trend.

According to Real Estate 114, a private statistical survey agency, Seoul apartment sale prices rose by 0.01%, marking an upward trend for the first time in nine weeks. Reconstruction apartments increased by 0.01%, and general apartments rose by 0.02%.

Gangnam, which has many high-priced reconstruction complexes, fell by 0.03%, but the decline narrowed compared to the previous week (-0.06%). Gangdong (0.02%), Songpa (0.02%), and Seocho (0.00%) showed an upward or stable trend.

However, since government real estate regulations continue and economic recession concerns due to the resurgence of COVID-19 persist, it is pointed out that the real estate market is unlikely to suddenly revive.

Lim Byungcheol, chief researcher at Real Estate 114, explained, "Although urgent sales were transacted mainly in the Gangnam area, concerns about further declines remain, so it is not leading to follow-up buying momentum."

The Korea Real Estate Board also analyzed that Seoul apartment prices have fallen for nine consecutive weeks due to ongoing concerns about economic recession, such as worsening economic growth forecasts and increasing unemployment benefits.

Accordingly, experts expect that the Bank of Korea's decision on the 28th to lower the base interest rate by 0.25 percentage points to 0.5% will not have a significant impact on the real estate market.

Park Wongap, senior specialist at KB Kookmin Bank, explained, "Uncertainty due to COVID-19 remains, and since interest rates are already ultra-low, even if rates are further lowered, the sensitivity to the real estate market will not be significant."

The Bank of Korea's base rate cut indicates growing concerns about the macroeconomy due to the contraction of the real economy, and since real estate is 'another mirror' reflecting the macroeconomy, it is difficult to expect long-term demand to increase.

Senior specialist Park said, "Especially for ultra-high-priced homes in speculative overheated zones exceeding 1.5 billion won, loans are completely prohibited, and the burden of holding taxes has increased due to the realization of official prices, so even if some transactions occur, a sharp rebound is difficult." He added, "It is expected that small-to-medium-sized and mid-to-low-priced homes in non-regulated areas will see some breathing room in transactions."