Seoul Apartments in Steep Decline... Detached Houses Remain 'Steadfast'

[Asia Economy Reporter Kim Hyemin] Unlike the Seoul apartment market, which has seen a pronounced price decline this year, the detached house market continues to maintain an upward trend. While apartment prices surged sharply in a short period, causing a noticeable drop in transaction volume, detached houses have withstood downward pressure due to their relatively smaller price increases. Expectations for redevelopment projects and investment demand have also played a role.

According to the monthly housing price trend report released by KB Kookmin Bank on the 25th, the sales price of detached houses in Seoul rose by 0.11% in July compared to the previous month. The rate of increase also expanded by 0.04 percentage points from 0.07% in June. In contrast, the apartment sales price growth rate fell by 0.1 percentage points from 0.13% to 0.03% in the same period. The price increase for multi-family houses also halved from 0.26% to 0.11%. As a result, the overall housing sales price rose by only 0.07%.

Detached houses in Seoul have historically experienced smaller price increases compared to apartments or multi-family houses. In August last year, apartment prices rose by 1.59% month-on-month, multi-family houses by 0.73%, while detached houses increased by only 0.43%. However, as apartment prices surged rapidly, multi-family houses such as villas gained attention. Although the price increase for multi-family houses slowed this month, detached houses actually saw an expansion in their price growth. As of July, the average sales price of detached houses in Seoul was recorded at 969.77 million KRW.

The resilience of the detached house market during the real estate downturn, in contrast to the noticeably slowed price growth of apartments, is analyzed to be due to their relatively undervalued prices. In fact, while apartments and villas increased their price growth over the past one to two years, detached houses did not show drastic price fluctuations. Yoon Jihae, Chief Researcher at Real Estate R114, stated, "The price increase trend of detached houses moving differently from apartments and villas is a process of catching up belatedly."

The reduced supply of detached houses in Seoul compared to the past also appears to have contributed. This adds value through scarcity. Transaction volumes have also decreased relatively less. While apartment transaction volumes dropped by 40% over one year from January to May, detached houses decreased by about 30%, from approximately 70,000 to 50,000 cases.

Increased investment demand driven by expectations for redevelopment has also played a part. The Yoon Seok-yeol administration and Seoul Mayor Oh Se-hoon have emphasized deregulation of redevelopment projects such as urban complex development. In particular, although initial investment costs for detached houses are higher than for villas, they have the advantage of less complicated stakeholder interests. Beyond redevelopment projects, there seems to be steady demand to demolish detached houses and change their use to commercial-residential buildings for rental income. However, since detached houses have lower liquidity and less consistent market prices compared to apartments, it is uncertain whether this trend will continue. Chief Researcher Yoon said, "The government's policy announcement on redevelopment projects in August could influence the future price direction."