Has the Actual Transaction Price of Seoul Apartments Declined?

Provisional Actual Transaction Price -0.46%... Negative for the First Time in 18 Months Upon Confirmation

[Asia Economy Reporter Minyoung Kim] On the 24th, Noh Hyung-wook, Minister of Land, Infrastructure and Transport, claimed that "house prices are entering a correction phase," citing the actual transaction prices of Seoul apartments, which are expected to turn negative for the first time in 18 months. After the average sale price of Seoul apartments hit 1,140.65 million KRW in October, buying sentiment weakened due to government loan restrictions and tax tightening policies, leading to fewer transactions. As a result, cases of lowering prices to close deals have increased. However, some point out that it is premature to conclude that house prices have entered a correction phase based solely on provisional data, as signs of transaction recovery have appeared since mid-month when commercial banks began easing some loan regulations.

According to the Apartment Actual Transaction Price Index from the Korea Real Estate Board on the 25th, the monthly change rate of Seoul apartment actual transaction prices is predicted to turn negative from 1.52% in September to -0.46% (provisional) in October. This would be the first negative figure in seven months since April (-0.87%). If the provisional figure turns negative compared to the previous month, it would mark the first decline in Seoul apartment actual transaction prices in 18 months since April last year (-0.86%). Although the final figure will be announced on the 15th of next month after the transaction data is fully compiled and may change, considering the market stagnation caused by loan restrictions, the likelihood of a negative figure is high. Data on 'Metropolitan Area Apartment Actual Transaction Price Trends' submitted to Rep. Kim Hoe-jae of the Democratic Party by the Ministry of Land also shows that the proportion of declining apartment transactions in Seoul last month increased by 8.2 percentage points to 31.8% compared to September. The fact that Minister Noh cited this index as an indicator of house price correction is interpreted as reflecting this recent atmosphere.

The period Minister Noh referred to when he said, "House prices fell by up to 40% from 2006 to 2013," was also a time when Seoul apartment actual transaction prices struggled to avoid a downward trend. Since statistics began to be compiled in 2006, Seoul apartment actual transaction prices have fluctuated, recording five consecutive months of negative growth from July to December 2008 during the global financial crisis. Coupled with an oversupply phenomenon, Seoul apartment actual transaction prices underwent a prolonged correction, recording negative growth rates for 11 consecutive months from February to December 2013. As a result, apartments such as Eonma Apartments in Daechi-dong and Hyundai Apartments in Apgujeong in Gangnam fell by up to 40% from their peak prices, causing significant social issues like 'house poor' and 'rent poor.'

However, some argue that it is too early to be certain that house prices are in a correction phase based solely on recent market indicators. Yoon Ji-hae, Senior Researcher at Real Estate 114, said, "Whenever the government announces real estate policies such as recent loan tightening measures, there have been temporary downward movements, but it is premature to describe these temporary indicator trends as a correction phase. Indicators that can gauge a downward turn, such as subscription competition rates, price declines, increases in unsold units, and inventory increases, have not yet shown clear signs of change."