11 Consecutive Weeks of Highest Increase in Seoul
Investment Demand Surges in Reconstruction Complexes Avoiding Land Transaction Permission System
[Asia Economy Reporter Lim On-yu] More than 60% of apartments traded in Nowon-gu, Seoul in June recorded new highest prices. In particular, investment demand has concentrated on reconstruction complexes that avoided the land transaction permit system, maximizing the balloon effect.
On the 25th, an analysis by Asia Economy of the Ministry of Land, Infrastructure and Transport's actual transaction price registration system found that out of 100 apartment sales transactions in Nowon-gu in June, 63 were at prices higher than the previous highest price. This phenomenon was evenly observed throughout Nowon-gu. In Sanggye-dong, 23 out of 37 transactions (62%) were new highest price deals; in Junggye-dong, 12 out of 19 (63%); in Hagye-dong, 4 out of 6 (66%); in Wolgye-dong, 10 out of 15 (66%); and in Gongneung-dong, 14 out of 23 (60%) were new highest price transactions.
On the 12th of this month, a 127㎡ (exclusive area) apartment in Woseong, Hagye-dong was sold for 1.35 billion KRW. This price is 155 million KRW higher than the previous highest price of 1.195 billion KRW registered in November last year. Earlier, on the 5th, an 84㎡ unit in Jugong Complex 5, Junggye-dong changed hands for 1.26 billion KRW. This surpassed the previous highest price of 1.1 billion KRW registered in March by 106 million KRW within three months. On the 3rd, a 59㎡ unit in Jugong Complex 6, Sanggye-dong was sold for 870 million KRW. The actual transaction price in November last year was 690 million KRW, so it increased by 180 million KRW in six months.
As new highest prices continue to emerge, apartment prices in Nowon-gu have shown a strong upward trend for more than two months. According to the Korea Real Estate Board, the apartment sale price in Nowon-gu rose by 0.25% in the third week of June, the same as the previous week, marking the highest increase rate in Seoul for 11 consecutive weeks. This is the highest level in two years and nine months since the second week of September 2018.
The ongoing new highest price trend in Nowon-gu apartments is analyzed to stem from the premium effect of Seoul Mayor Oh Se-hoon's promotion of reconstruction revitalization. Nowon-gu, where 15 housing development districts were established in the 1980s, is densely populated with old mid-to-low priced apartments that are soon to undergo reconstruction. By 2030, a total of 124 complexes with 112,320 apartment units are expected to be classified as subjects for reconstruction safety inspections.
Unlike major reconstruction complexes such as Apgujeong-dong in Gangnam-gu, Yeouido-dong in Yeongdeungpo, and Mok-dong in Yangcheon-gu, Nowon-gu has avoided the land transaction permit system, allowing gap investments, i.e., sales with existing leaseholds. Moreover, since most complexes are still before safety inspections, they are free from regulations on transferring union member status, enabling 'all-in purchases' by people in their 30s who lack capital. Park Won-gap, Senior Real Estate Specialist at KB Kookmin Bank, said, "For people in their 30s with minimal capital accumulation, it seems they are flocking to areas like Nowon with many mid-to-low priced reconstruction apartments where they can borrow money or purchase with existing leases."
As the real estate taxation reference date of June 1 has passed, there is a tendency for listings to be withdrawn, leading to expectations that the rate of house price increases, including in Nowon-gu, may rise further. Yoon Ji-hae, Senior Researcher at Real Estate 114, said, "Some properties are being withdrawn around the taxation reference point for tax-saving purposes, and it is highly likely that a phenomenon of listing shortages will occur for a considerable period," adding, "As a result, the seller's market will strengthen from June, as in past trends, potentially accelerating the upward trend."
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