Housing Transactions Plunge 36%... Apartment Prices Soar

June Seoul Metropolitan Area Transaction Volume Down 44.4%... Seoul Down 39.8% Year-on-Year
Despite Transaction Drought, Housing Prices Soar... Metropolitan Area Apartments Hit Highest in 2 Weeks
Concerns Over Jeonse Crisis Grow... Seoul Jeonse Prices See Highest Increase in 1 Year

[Asia Economy Reporter Kangwook Cho] Last month, the nationwide housing sales volume plummeted by more than 30%, intensifying the transaction drought phenomenon. However, despite the government's repeated warnings about housing price peaks, apartment prices in the Seoul metropolitan area continued to record the highest growth rate for two consecutive weeks. The increase rate of jeonse prices in the metropolitan area also soared to the highest level in over six years.

◆Transaction volume drops about 36%... Metropolitan area down over 44% = According to the Ministry of Land, Infrastructure and Transport and the Korea Real Estate Board on the 30th, the total nationwide housing sales volume in June was recorded at 88,922 cases. This is an 8.8% decrease compared to the previous month and a 35.8% shrinkage compared to the same period last year. In particular, the transaction volume in the metropolitan area decreased by 44.4% compared to the same period last year. Seoul also recorded only 11,721 cases, down 39.8% from the same period last year.

Accordingly, the cumulative nationwide housing sales volume from the beginning of this year to June was 559,323 cases, down 9.9% compared to the same period last year. The metropolitan area (278,340 cases) decreased by 18.0%, and the provinces (280,983 cases) decreased by 0.1%. By type, apartment transactions (57,861 cases) decreased by 43.5% compared to one year ago. Non-apartment transactions decreased by 13.9% during the same period.

The market analysis suggests that the deepening of the supply freeze after the property tax assessment date (June 1), along with expectations of further price increases due to the easing of reconstruction regulations, have led many homeowners to withdraw their listings.

◆Metropolitan area apartment prices hit highest for two consecutive weeks... Jeonse prices rise at the largest rate in six years = Although transactions have sharply contracted, housing prices remain very strong. According to the Korea Real Estate Board, as of the fourth week of July (26th), apartment prices in the metropolitan area recorded a 0.36% increase, the same as the previous week. This is the highest growth rate since the Board began compiling weekly statistics in May 2012. The Board explained, "The upward trend continues in areas with transportation and development benefits such as GTX and the Shinbundang Line, and prices are rising as reconstruction complexes and mid-to-low priced complexes in Seoul adjust their prices upward."

Concerns over the jeonse shortage are growing. Seoul apartment jeonse prices rose by 0.16%, expanding the increase from last week (0.15%). This is the highest increase rate in about a year since the first week of August last year (0.17%), right after the new lease law was implemented. The Korea Real Estate Board analyzed that factors such as reconstruction relocation demand originating from Gangnam and the moving season during school vacations influenced this.

The market points out that the full enforcement of the capital gains tax surcharge on multi-homeowners has further reduced apartment listings in major areas such as Seoul. Multi-homeowners are withdrawing listings as they enter a 'holding mode' through detours such as gifting, betting on housing price increases. In particular, despite repeated peak warnings, the supply freeze phenomenon is intensifying due to declining trust in the government's real estate policies.

Ko Joon-seok, adjunct professor at Dongguk University Law School, said, "The capital gains tax and property tax surcharges on multi-homeowners, who should supply listings, have blocked the circulation of listings," adding, "In a situation where new apartment supply from the government is not forthcoming, the deepening supply freeze will not only raise housing prices in the second half of the year but also cannot rule out a jeonse crisis."