Pre-Subscription Also Useless... Capital Region Housing Prices Skyrocket

Capital Region Apartment Prices Hit Record High Increase Rate
Rising Trend in Seoul's Mid-Low Price Areas like Nowon and Dobong
Minimal Effect on Price Stability Despite Pre-Subscription
Seoul's Young Generation Faces Difficulty Winning... Concerns Over Panic Buying

Although pre-sale subscriptions have begun, apartment prices in Seoul and the metropolitan area continue to soar. In particular, the metropolitan area has experienced market overheating to the extent that the highest-ever rate of increase has been broken four times in the past two months. Some predict that buying demand may weaken somewhat once pre-sale subscriptions are in full swing, but so far, the effect on stabilizing housing prices appears minimal. Since the recent disclosure of pre-sale subscription competition rates, a perception that "winning is not easy" has spread mainly among young residents in Seoul, raising concerns that ‘panic buying’ may resurface.

Metropolitan Area Housing Prices Set New Records... Increased Demand for Mid-to-Low Priced Homes

According to the Korea Real Estate Board’s ‘Weekly Apartment Price Trend Survey’ on the 6th, apartment prices in the metropolitan area rose by 0.37% this week. This is the highest weekly increase since the Board began compiling statistics in May 2012. The real estate markets in Seoul, Incheon, and Gyeonggi-do are all overheated, causing housing prices to rise sharply. The highest-ever weekly increase rates were renewed four times in the past two months: 0.34% in the second week of June, 0.35% in the third week of June, 0.36% in the third week of July, and 0.37% this week.

Seoul also saw a 0.20% increase this week, marking the largest rise since the third week of December 2019. Notably, areas with relatively many mid-to-low priced homes such as Nowon-gu (0.37%), Dobong-gu (0.26%), Gwanak-gu (0.24%), and Gangseo-gu (0.22%) showed prominent price increases. Despite already significant price rises due to buying demand since early this year, steady demand for home ownership continues to push prices to new highs. A Korea Real Estate Board official explained, "In Seoul, the upward trend continues mainly in relatively mid-to-low priced areas and reconstruction complexes with expectations for redevelopment projects."

"Winning Pre-Sale Subscriptions Is Difficult"... Sense of Deprivation Among Seoul’s 30s

The continued chase buying centered on areas with clusters of mid-to-low priced apartment complexes seems partly influenced by disappointment with pre-sale subscriptions. Given the soaring sale and jeonse (long-term lease) prices in major areas of Seoul and Gyeonggi-do, many prefer to purchase mid-to-low priced apartments now rather than wait uncertainly for pre-sale subscriptions.

Since the competition rates for the first round of special pre-sale subscriptions and newlywed hope town local subscriptions were disclosed on the 3rd, signs of panic buying reemerging among young people, especially newlyweds and prospective newlyweds living in Seoul, have been detected. The problem is not only the high competition rate, with about 40,000 applicants for 3,955 units, but also that a significant portion of the units are preferentially supplied to local residents, making it difficult for young Seoul residents with low points to win.

In fact, for the newlywed hope town, 747 units in Seongnam Bokjeong 1 and Uiwang Cheonggye 2?considered good locations among the five districts?were fully subscribed by local applicants. This means Seoul residents had no chance. A newlywed couple in their 30s living in a jeonse in Seodaemun-gu, Seoul, said, "I applied for the pre-sale subscription, but seeing the competition rate, I don’t think I will win," adding, "I am considering ‘all-in’ buying once the lease contract on our current rental home ends."

[Image source=Yonhap News]

Pre-Sale Subscriptions Ineffective... Will Panic Buying Increase Again?

There is also much dissatisfaction that pre-sale subscription units are mostly composed of small to medium-sized units. Among the 4,333 units in the first pre-sale subscription, only 73 units are 84㎡, known as the standard size. Moreover, the newlywed hope town has no 84㎡ units at all, mostly consisting of 46㎡ and 55㎡ units. These sizes may feel cramped for families with school-age children or two or more children. Eunhyung Lee, a senior researcher at the Korea Institute of Construction Policy, pointed out, "The government is trying to increase supply by building small apartments cheaply, so 84㎡ units cannot be produced in large numbers."

Industry insiders analyze that housing purchases by people in their 30s and 40s may increase further. The accumulation of demanders who fail to win pre-sale subscriptions due to high competition rates could become a factor of market instability. According to the Korea Real Estate Board’s monthly apartment transaction status, the proportion of transactions by those aged 30 or younger in Seoul last month reached 40.7%. A representative from a real estate agency in Hong Eun-dong, Seodaemun-gu, said, "Inquiries from newlywed couples in their 30s looking to buy homes continue steadily," adding, "As jeonse prices keep rising, it seems unlikely that sale prices will fall."