[The Beginning of the Housing Price Bubble Collapse]②Will the Iron Fortress Also Fall... The Vanished 'Seoul Bulpae'

Dobong and Nowon, Crowded with Yeongkkeuljok, Ride the House Price Decline Trend
Gangnam 4 Districts Are a Thing of the Past... Songpa and Gangdong See Sharp Drop in Sale Prices
"Seocho and Jongno Also Likely to Decline... The Second Half of This Year Is the Toughest"

[Asia Economy Reporters Seoyul Hwang and Hyemin Kim] The phrase 'Seoul is invincible' is becoming a thing of the past amid interest rate hikes and weakened buying demand. Dobong and Nowon districts, which saw a fiery surge last year due to "Yeongkkeul" (borrowing to the limit) buying, along with Songpa and Gangdong districts, known as part of the Gangnam 4 districts, have already entered a phase of declining housing prices. Other autonomous districts are also experiencing a sharp decrease in the rate of price increases. Experts predict that Seoul will likely join the nationwide trend of falling housing prices for the time being.

According to Real Estate R114 REPS on the 12th, the apartment price change rate in Seoul in September this year rose by 1.35% compared to the end of October last year. Considering that the change rate for the same period a year ago was 15.48%, this represents a significant drop.

Among the 25 autonomous districts, four experienced a decline in housing prices. Dobong district recorded the largest drop at -1.16%. Following were ▲Songpa (-0.62%) ▲Nowon (-0.24%) ▲Gangdong (-0.12%). Dongdaemun (0.01%), Eunpyeong (0.36%), and Seongbuk (0.4%) also recorded increases in the 0% range. The top three districts with the highest price increases were ▲Yongsan (4.49%) ▲Seocho (4.43%) ▲Jongno (3.37%).

The Fall of Nowon and Gangbuk Districts, Once Hotspots for Yeongkkeul Buying ? Why?

Dobong, which saw the largest price drop over the past year, and Nowon, ranked third, were the second and first highest districts in terms of price increase rates until last year. According to KB Real Estate monthly statistics, the apartment price increase rates in Nowon and Dobong districts in September last year compared to the same month the previous year were 27.27% and 23.48%, respectively.

The sharp rise in prices was driven by the Yeongkkeul buying trend among the 20s and 30s age group. These areas had relatively affordable apartment prices, lowering the entry barrier for buyers. The average apartment price in the Gangbuk area was around 600 to 700 million KRW in 2020, contrasting with the Gangnam area, where average prices were already between 1 to 1.2 billion KRW. Because of this, the 'panic buying' phenomenon that began after 2020 was mainly concentrated in Gangbuk, and as more people sought to buy homes, the average price in Gangbuk surged to 1 billion KRW by February this year.

However, recent interest rate hikes and recognition of peak apartment prices have sharply reduced buying demand, leading to a downward trend in prices. This is partly due to a relative increase in supply. According to Asil, a real estate big data company, as of the previous day, listings in Nowon and Dobong districts increased by 42.9% and 50%, respectively, compared to last year. Meanwhile, according to Seoul Real Estate Information Plaza, the number of transactions was only 17 and 19, respectively, which is about one-twelfth and one-fourth of the same month last year.

Individual complexes are also mostly experiencing price declines. The Cheonggu 3rd complex in Junggye-dong, Nowon district, with an exclusive area of 84.77㎡, which reached 1.42 billion KRW last year, was sold for 1.25 billion KRW in June. The Changdong Jugong 4th complex (41.3㎡) in Dobong district was traded for 450 million KRW last month, down from 620 million KRW in October last year.

The decline in buyers, who had expectations for reconstruction due to many aging apartments, also seems to have affected prices in these two districts. The Changdong Jugong 19th complex (60.5㎡) in Dobong district, built in 1988, was traded for 660 million KRW this month. Considering it was sold for 977 million KRW in August last year, this represents a drop of 317 million KRW in just over a year.

Will the Gangnam 2 Districts Harden? Songpa and Gangdong Also in Decline

Songpa and Gangdong districts, along with Seocho and Gangnam districts, are known as the Gangnam 4 districts and have recorded high price change rates over the past two years. This is because they are located on the outskirts near the Gangnam 2 districts and have relatively affordable prices. According to KB Real Estate monthly statistics, the year-on-year apartment price change rates in Songpa and Gangdong districts in September last year were 15.83% and 15.45%, respectively.

However, these areas have not escaped the downward trend. This year, the gap in change rates with the Gangnam 2 districts has widened. Professor Hapsu Park, adjunct professor at Konkuk University Graduate School of Real Estate, said, "Unlike Seocho and Gangnam districts, which are less affected by loan regulations and interest rate hikes, Jamsil and Gangdong districts, as secondary areas to the Gangnam 2 districts, are inevitably more sensitive to market influences."

It appears that the price decline is more pronounced in so-called flagship apartments. Helio City in Garak-dong, Songpa district (84.98㎡), was traded for 2.02 billion KRW in June, down 350 million KRW from the highest price of 2.37 billion KRW recorded in September last year. The large complex Jamsil Els (84.8㎡) was also traded for 1.95 billion KRW this month, compared to 2.31 billion KRW for the same floor in August. This represents a nearly 400 million KRW drop in actual transaction price within two months.

Gangdong district has also attracted attention due to reconstruction issues, but recently, with the Dunchon Jugong issue and delays in redevelopment projects, listings have accumulated and asking prices have been adjusted downward. In August, the pre-sale right for an 83㎡ unit in Dunchon Jugong was sold for 1.739 billion KRW, down 631 million KRW from 2.37 billion KRW at the end of last year.

Despite Yongsan and Seocho Holding Firm... "Seoul to Remain in Decline for Now"

Relatively, Yongsan, Jongno, and Seocho districts have defended prices due to local favorable factors. Yongsan district has seen issues such as the relocation of the presidential office under the Yoon Seok-yeol administration, development of the Yongsan Maintenance Depot site, and redevelopment of Hannam New Town. Jongno district has attracted attention due to the Blue House relocation and Seoul city redevelopment projects. Seocho district also has new large-scale apartments in Gangnam and redevelopment issues in Bangbae-dong.

Nevertheless, experts predict that these districts will also find it difficult to avoid a downward trend in the future. Won-gap Park, senior real estate specialist at KB Kookmin Bank, said, "There is no business in front of interest rates," adding, "While movements may differ depending on regional characteristics, the difference is whether the decline is less or more severe." Kyung-hee Yeo, senior researcher at Real Estate R114, said, "Since the rate of increase has also decreased in these districts, it should be seen as a relative defense against decline rather than being solid. Overall, as buying demand disappears and the market enters a wait-and-see phase, these areas will inevitably follow a similar path."

Hyoseon Kim, senior real estate specialist at NH Nonghyup Bank, said, "Districts like Seocho and Jongno are likely to shift to a decline next year. It is a difficult time to say that prices in Seoul will rise. The second half of this year is the toughest, and next year will be a period of adjustment. Buyers will need about two years to endure this period," she forecasted.