Half of Seoul Apartments Exceed 900 Million Won... Mid-to-Low Priced Units Continue Transition to High-End This Year

Real Estate 114 Reports 630,000 High-Price Homes Over 900 Million Won Last Year
Surging 12.4%p Compared to Previous Year

On the 5th, from the Lotte World Tower observatory in Songpa-gu, Seoul, where apartment prices and jeonse prices continue to rise without turning downward, apartments in Songpa-gu are being observed. Photo by Jinhyung Kang aymsdream@

[Asia Economy Reporter Kim Hyemin] Last year, as housing prices surged, it was found that half of the apartments in Seoul exceeded 900 million KRW. Apartments priced over 900 million KRW are subject to loan regulations and are therefore referred to as ‘high-priced housing’ in the market. Even after the new year began, the phenomenon of existing mid- to low-priced apartments being traded above 900 million KRW continues, suggesting that the proportion of apartments exceeding 900 million KRW will keep increasing.

According to Real Estate 114 on the 25th, among the 1,284,737 households in Seoul that the company analyzes for market prices, 637,189 apartments were priced over 900 million KRW as of the end of last year. This means that nearly half, 49.6%, of the total are apartments exceeding 900 million KRW. Compared to the previous year (37.2%), the proportion of such housing increased sharply by 12.4 percentage points. Apartments priced below 900 million KRW numbered 647,548, which is about 140,000 fewer than the previous year. Meanwhile, ultra-high-priced apartments exceeding 1.5 billion KRW increased by 33.8%, from 199,517 units to 267,013 units.

The trend of mid- to low-priced housing entering the high-priced apartment category continues into the new year. According to the Ministry of Land, Infrastructure and Transport’s Real Transaction Price Disclosure System, there have been about 15 cases where apartments that were traded below 900 million KRW until last year exceeded 900 million KRW in transactions this January.

An 84.89㎡ (exclusive area) unit in Shingil Woosung 4th Complex, Yeongdeungpo-gu, Seoul, was traded in the 1 billion KRW range after rising more than 100 million KRW in just one week. Until July last year, it was sold for 890 million KRW, but on the 9th of this month, it reached 900 million KRW, and on the 15th, it recorded a new high of 1.025 billion KRW. Similarly, the 84.99㎡ Cheonggyecheon Daeseong Skyrex 2nd Complex in Yongdu-dong, Dongdaemun-gu, which was priced at 680 million KRW as recently as August last year, was traded for 953 million KRW on the 5th of this month, thus becoming subject to loan restrictions. The 84.34㎡ unit in Chorwon Donga, Dunchon-dong, Gangdong-gu, which sold for 880 million KRW on December 30 last year, was traded for 950 million KRW on the 12th of this month, just over ten days later.

Currently, various regulations apply to apartments priced over 900 million KRW in real estate taxation and loan policies. Even for single-homeowners, capital gains tax is imposed on the portion exceeding 900 million KRW when selling the house, and the acquisition tax rate increases to 3.3%. In regulated areas, the loan-to-value ratio (LTV) for mortgage loans is reduced to 20% for the portion exceeding 900 million KRW. The Debt Service Ratio (DSR) regulation, which refers to the ratio of principal and interest repayment of all household loans to annual income, is also being strengthened.

Because of this, controversy over the criteria for high-priced housing is also expanding. An industry insider said, "The sharp rise in prices even for mid- to low-priced housing proves that the government’s price-based regulations have no effect on stabilizing housing prices," and pointed out that "a re-examination of existing regulations is necessary."

On the other hand, there are counterarguments that caution should be exercised in raising the criteria. Lim Byungcheol, Senior Researcher at Real Estate 114, said, "If the high-priced housing standard is raised, apartments below that threshold will find it easier to obtain loans, which could cause another balloon effect."