Even as Seoul Reconstruction Expectations Subside... Buying Sentiment Ignites

Trade Supply-Demand Index Records 103.7
Buying Sentiment Dominates for 4 Consecutive Weeks
Clear Trend in Gangnam 4 Districts Concentrated on Reconstruction

[Asia Economy Reporter Jo Kang-wook] In the Seoul apartment sales market, buyers have outnumbered sellers for four consecutive weeks. As housing prices show signs of rising again, buying sentiment is expanding, especially around reconstruction complexes.

According to the Korea Real Estate Board on the 7th, the apartment sales supply-demand index in Seoul this week (based on the survey on the 3rd) was 103.7, up 1.0 point from last week’s 102.7. This marks the fourth consecutive week the index has exceeded the baseline of 100. The index indicates stronger buying sentiment when it rises above 100, meaning demand exceeds supply.

The Seoul apartment sales supply-demand index began to decline after the announcement of the 2·4 housing supply plan, starting from the second week of February, and fell below the baseline for the first time this year at 96.1 in the first week of April. However, it rebounded after one week, surpassing 100 at 100.3 in the second week of April, then rising to 101.1 in the third week, 102.7 in the fourth week, and 103.7 in the first week of this month, showing a continuous increase for four weeks.

Initially, after the government announced the 2·4 plan to supply large-scale new towns in the metropolitan area, buying sentiment calmed down. However, during the Seoul mayoral election, both ruling and opposition parties mentioned easing reconstruction regulations, which is interpreted as reviving buying sentiment centered on reconstruction complexes.

Seoul Mayor Oh Se-hoon, who promised a rapid easing of reconstruction regulations within a week of taking office, designated four areas?Apgujeong, Yeouido, Seongsu, and Mok-dong?as land transaction permission zones immediately after his election, sending repeated warning messages to the market due to concerns about backlash. Recently, he also postponed review requests for Jamsil Jugong Complex 5 in Songpa-gu and Eunma Apartment in Gangnam-gu, showing a cautious stance. However, according to this week’s Korea Real Estate Board survey conducted after the regulation enforcement date on the 27th of last month, buying sentiment in the market has not subsided despite the regulations but has rather strengthened.

In response to this situation, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, issued a strong warning message at the real estate market inspection meeting with related ministers yesterday, stating, "The recent rise in Seoul apartment prices has expanded for two consecutive weeks after the by-election, and especially the instability signs in major complexes in the Gangnam 4 districts with reconstruction issues continue."

In fact, this week’s sales supply-demand index was highest in the southeastern area, including Gangnam, Seocho, Songpa, and Gangdong districts?where Apgujeong, Banpo, and Jamsil-dong are located?rising 0.3 points from the previous week to 106.7. The southwestern area, including Yeouido and Mok-dong, rose 1.9 points to 104.3, showing the largest increase. The northeastern area, including Nowon-gu with Sanggye and Junggye-dong, which avoided the land transaction permission zone regulation, rose 0.7 points to 102.0 compared to the previous week. The downtown area, including Yongsan, Jongno, and Jung-gu, rose 0.6 points to 104.7. The northwestern area, including Mapo and Seodaemun-gu, reached the baseline at 100.0 this week, up from 98.9 last week.

Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "The last-minute buying frenzy before the designation of the land transaction permission zones stimulated buying sentiment. Additionally, a balloon effect appeared near the regulated areas, further fueling buying sentiment."