Seoul's 'Sale and Jeonse' Price Increases Both Narrow... Is the Real Estate Policy Taking Effect?

Korea Real Estate Board Weekly Apartment Price Survey for 2nd Week of August
Price Increase Narrowed by 7·10 and 8·4 Measures
Seocho and Songpa Districts Shift to Stable... Jeonse Prices Also Slow Down

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] Since the announcement of the July 10 real estate measures and the August 4 housing supply measures, the rate of increase in Seoul apartment sale prices has been continuously shrinking. In particular, Seocho-gu and Songpa-gu shifted to a stable trend this week, showing a slight pause in housing prices.

In the jeonse market, instability continues with a sharp rise in deposits in major complexes in Seoul due to the implementation of the Lease Protection Act, but statistically, the rate of increase has slowed compared to the previous week.

According to the Korea Real Estate Board's weekly apartment price trend survey for the second week of August on the 13th, Seoul apartment sale prices rose by only 0.02% this week.

The Korea Real Estate Board explained, "With the passage of the three real estate laws in the National Assembly plenary session and the announcement of supply measures, buying demand has weakened, showing a stable trend," adding, "The overall rate of increase in Seoul has shrunk compared to last week."

The rate of increase in Seoul apartment sale prices has been decreasing from 0.11% as of last month on the 6th to 0.09%, 0.06%, 0.04%, 0.04%, and 0.02% sequentially.

North of the Han River, buying demand weakened in Dongdaemun-gu (0.05%), Gangbuk-gu (0.03%), Nowon-gu (0.02%), and Dobong-gu (0.02%), leading to a reduced rate of increase.

In the Gangnam 4 districts, the burden of increased property tax following the July 10 measures deepened the wait-and-see attitude. Gangnam-gu (0.01%) saw increases mainly in Apgujeong and Daechi-dong, and Gangdong-gu (0.01%) rose mainly in Myeongil and Seongnae-dong, but the rate of increase shrank.

Songpa (0.00%) and Seocho-gu (0.00%) shifted to a stable trend as buying inquiries decreased. Outside the Gangnam 4 districts, Gwanak-gu (0.04%) rose mainly in Sillim-dong, where prices are relatively low within the area, and Yeongdeungpo-gu (0.04%) increased mainly in Yeouido and Singil-dong, where there is anticipation of public reconstruction, but the rate of increase also slowed.

Seoul apartment jeonse prices rose by 0.14%, narrowing the increase compared to the previous week (0.17%). This contrasts with the recent two weeks' sharp jumps of 0.12%, 0.14%, and 0.17%.

The Korea Real Estate Board explained, "The upward trend continued mainly in areas with good access to subway stations or favorable school districts, but due to seasonal off-season and the rainy season, some demand decreased, leading to a reduced rate of increase."

Gangdong-gu (0.24%) rose mainly in new complexes in Godeok and Gangil-dong, and Songpa-gu (0.22%) increased mainly in popular complexes in Jamsil and Sincheon-dong as well as older complexes in Bangi and Geoyeo-dong.

Gangnam-gu (0.21%) saw jeonse prices rise in school-preferred areas such as Daechi and Dogok-dong, and Seocho-gu (0.20%) showed an upward trend in new complexes in Banpo-dong and Jamwon-dong. However, the rate of increase shrank in all Gangnam 4 districts.

Although the figures show a reduced rate of increase, jeonse deposits are soaring in many major complexes across Seoul.

In Bukahyeon-dong, Seodaemun-gu, the Hills State Sinchon 42m² (exclusive area) recently formed jeonse prices between 480 million and 520 million KRW, surpassing the July 2018 sale prices (390 million to 415 million KRW).

This is interpreted as being due to the implementation of the Lease Protection Act, including the Jeonse and Monthly Rent Cap System and the Contract Renewal Request System, as well as the strengthened actual residence requirements for capital gains tax exemption, which greatly reduced the jeonse supply.