Seoul Apartment Prices Fall Most in 9 Years... Pre-sale Rights 'Mafi' Rising in the Capital Area

Seoul Falls 0.15%... Largest Drop Since August 2013

Photo by Asia Economy

As the nationwide real estate market has entered a period of transaction extinction beyond a transaction cliff, apartment prices in Seoul have fallen to their lowest level in nine years.

According to the apartment price trend data for the first week of September (surveyed as of September 5) released by the Korea Real Estate Board on the 8th, apartment prices in Seoul fell by 0.15% compared to the previous week.

This decline is larger than the 0.13% drop last week, marking the steepest fall in 9 years and 1 month since August 5, 2013 (-0.15%).

The Real Estate Board analyzed, "As the interest burden increases due to interest rate hikes and concerns over further housing price declines spread, transaction sentiment is shrinking and a wait-and-see stance continues," adding, "Only intermittent transactions centered on urgent sales are taking place, and as listing prices continue to be adjusted downward, the rate of decline is expanding."

Source: Korea Real Estate Board

Apartment prices in Gangnam-gu and Seocho-gu fell by 0.09% and 0.03%, respectively, with the decline widening compared to last week (-0.06%, -0.02%). Songpa-gu also recorded a 0.16% drop, down from -0.12% the previous week.

In the Gangbuk area, where mid-to-low priced apartments are concentrated, both Nowon-gu and Dobong-gu saw a 0.30% decline.

Gyeonggi Province recorded a larger decline of -0.22% compared to last week's -0.21%, while Incheon maintained its decline rate at -0.22%.

Amid ongoing noise surrounding the redevelopment of the first-generation new towns, Bundang in Seongnam fell by 0.09%, slightly less than last week's -0.12%.

Goyang, home to Ilsan New Town, saw a 0.13% drop, a larger decline than last week's -0.11%.

The overall apartment prices in the metropolitan area fell more sharply, from -0.20% last week to -0.21% this week.

In the provinces, prices fell by 0.13%, a larger drop compared to last week's -0.11%, resulting in a nationwide weekly apartment price decline of -0.17%, following last week's -0.15%.

Among the 176 publicly announced cities, counties, and districts nationwide, the number of areas with price increases decreased from 26 to 22 compared to last week, stable areas remained at 11, and areas with price declines increased from 139 to 143.

As apartment prices continue to weaken, "Mafi" (minus premium) on pre-sale rights is also appearing nationwide. Mafi refers to listings priced lower than the pre-sale price. This phenomenon typically occurs when the real estate market hits bottom.

Last month, a Mafi pre-sale right priced 50 million KRW below the pre-sale price appeared in Songpa-gu, Seoul, and this week, a 20 million KRW Mafi appeared in Michuhol-gu, Incheon. In Daegu, known as the "graveyard of unsold units," Mafi is not uncommon.

National jeonse (long-term lease) prices are also continuing to decline.

Seoul's jeonse prices fell by 0.11% this week, following last week's -0.09% decline.

The Real Estate Board explained, "Due to the increased interest burden from rising loan interest rates, preference for half-jeonse and monthly rent continues, and new jeonse demand is decreasing," adding, "Along with falling sale prices, listing prices have been adjusted downward, expanding the rate of decline compared to last week."

Gyeonggi Province saw a larger decline of 0.25% following last week's -0.22%, while Incheon recorded -0.31%, slightly less than last week's -0.34%. The metropolitan area's jeonse prices fell by 0.21% following last week's -0.20%.

Meanwhile, there is a forecast that if the current weak market continues, the nationwide average apartment price will decline this year for the first time in nine years.

According to Real Estate R114, the nationwide average apartment price is expected to stop its eight-year upward trend since 2013 (-0.29%) and turn to a downward trend this year.

R114 explained, "Due to the increased interest burden from rapid interest rate hikes, strengthened loan regulations, and price burdens in major areas, housing transaction volumes have dropped to historically low levels," adding, "If there is no significant change in the current market environment, the weak phase is expected to continue even after the Chuseok holiday."