[Asia Economy Reporter Kim Hyemin] As demand for a ‘smart single property’ spreads in the real estate market, the price of large apartments in the Gangnam area of Seoul is approaching 3 billion KRW. With real estate tax policies easing the burden on single-homeowners, this trend is expected to strengthen further.
According to the monthly housing market trend report by KB Kookmin Bank’s Liv Real Estate on the 31st, the average sale price of large apartments in the Gangnam area this month was 2.93931 billion KRW. Large apartments refer to those with an exclusive area exceeding 135㎡. The average price in Seoul was 2.71463 billion KRW, and the average in the Gangbuk area was 2.07006 billion KRW.
The pace of price increases is also accelerating every year. In May 2018, the average price was 1.83623 billion KRW, rising to 1.95513 billion KRW in 2019, an increase of about 100 million KRW in one year. However, since then, the increase has grown to 200-300 million KRW annually, and in the past year alone, it surged by as much as 500 million KRW. Until the end of last year, prices were in the 2.7 billion KRW range, but they rose to 2.8 billion KRW early this year and climbed again to 2.9 billion KRW in April, showing a pattern of increasing by hundreds of millions every 2-3 months.
Despite the high prices, the price increase trend is steeper than in other size categories. The sale price index for large apartments in the Gangnam area was 101.5 in May, the highest among all sizes. The sale price index is an indicator showing price trends, with January of this year set as the baseline of 100. Large apartments exceeded all other categories: ▲Medium-large (over 102㎡ up to 135㎡) at 100.8 ▲Medium (over 85㎡ up to 102㎡) at 100.6 ▲Medium-small (over 60㎡ up to 85㎡) at 100.5 ▲Small (60㎡ or less) at 100.4.
This trend is also confirmed by actual purchase flows. According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system, the representative high-priced apartment in Seoul, Hannam The Hill in Hannam-dong, Yongsan-gu, with an exclusive area of 240㎡, signed a sale contract at 11 billion KRW the day before, setting a new record. This is an increase of 3.25 billion KRW in one year from 7.75 billion KRW in May last year.
The reason high-priced large apartments avoid the recent slowdown in house price increases is largely due to the scarcity of listings compared to the outskirts of Seoul. After the temporary exemption from the capital gains tax surcharge, multi-homeowners have sold houses in the outskirts of Seoul or Gyeonggi Province, leaving only their ‘smart single property.’ The growing expectations for reconstruction centered on large complexes in the Gangnam area have also contributed to the scarcity of listings. The fact that these ‘unbeatable’ prices are not affected by tightened loan regulations and that the search for a ‘smart single property’ has intensified as the price increase trend slows also seems to have influenced this.
With the new government planning to ease the real estate tax burden on single-homeowners, the demand for high-priced apartments in Gangnam is expected to strengthen further. The government recently announced measures to effectively freeze property taxes by restoring the holding tax burden for single-homeowners to the 2020 level. Ham Youngjin, head of the Zigbang Big Data Lab, said, "As the tax burden relief measures are selectively focused on single-homeowners, the preference for a smart single property and market polarization are expected to continue for the time being."
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