The First Actual Land Transaction in a Land Transaction Permission Zone Occurred in 'Mokdong'

Mokdong New Town 8 Complex 59㎡ Sale Price Drops 80 Million KRW from Record High
Difficult to See as Housing Price Stabilization Effect... "Property with Complex Rights"
Rather, Listing Decrease Continues to Push Asking Prices Up

Apartment complex view of Mokdong New Town, Yangcheon-gu, Seoul [Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] After Seoul Mayor Oh Se-hoon designated major reconstruction complexes as land transaction permission zones, the first actual transaction price has been reported. It was confirmed that Mokdong New Town 8 Complex in Yangcheon-gu was traded about 80 million KRW lower than last month's market price. However, since the property involved had complicated rights issues, it is difficult to conclude that the land transaction permission system has stabilized housing prices. Rather, local real estate agencies explained that the asking prices are rising due to the combined effect of reconstruction expectations and a shortage of listings.

According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 3rd, on the 17th of last month, a 59㎡ (exclusive area) unit in Mokdong New Town 8 Complex was sold with a contract price of 1.23 billion KRW. This is the first confirmed actual transaction since April 27, when areas including Mokdong, Apgujeong-dong in Gangnam-gu, Yeouido-dong in Yeongdeungpo-gu, and Seongsu-dong in Seongdong-gu were designated as land transaction permission zones. So far, a total of seven land transaction permissions have been granted in Yangcheon-gu, but there have been no cases of actual contract reports.

The actual transaction price of 1.23 billion KRW is significantly lower than the market price. Compared to the same area of the apartment being traded between April 9 and 20, just before the land transaction permission system was implemented, at prices ranging from 1.3 billion to 1.31 billion KRW, this is 80 million KRW cheaper.

Mayor Oh expected that housing prices would stabilize once speculative demand disappeared due to the land transaction permission system. However, local real estate agencies say it is difficult to see this effect materializing based on this transaction. A representative from Mokdong A Real Estate Agency (licensed) explained, "This transaction involved a property that was about to go to auction," adding, "Because the rights relationships were complicated, it was traded cheaper than the market price." Rather, they added, "Due to reconstruction expectations, regular listings have dried up, and asking prices continue to rise."

In fact, out of the total 1,352 households in this complex, there are currently only five listings available, and there is not a single listing for a 59㎡ unit. Other complexes are similar. Even the largest complex in New Town, Complex 7 (2,550 households), had only seven listings. A representative from B Real Estate in the area said, "Those who needed to sell did so before the land transaction permission system," adding, "Since there are no listings but real demand continues, the only thing left is for prices to rise."

Experts believe that the transaction cliff caused by the land transaction permission system may temporarily create the illusion of housing price stabilization, but ultimately it will not have a significant impact. Yang Ji-young, head of R&C Research Institute, said, "As experienced in Daechi and Samseong-dong, the land transaction permission system only reduces transactions but does not prevent price increases," and predicted, "In the absence of expectations for housing price stabilization, the upward trend in housing prices in Mokdong, Yeouido, and Apgujeong, where reconstruction expectations are high and scarcity is significant, will continue."