[The Beginning of the Housing Price Bubble Collapse] ③ The Holy Land of Yeongkkeul Has Become a Grave... Housing Prices Falling in Incheon

[Asia Economy Reporter Kim Min-young] Thanks to the chase buying by the 2030 generation, Incheon, which had the highest nationwide housing price increase rate last year, recorded the second highest nationwide housing price decline rate after one year, reversing the market sentiment. This is because the 2030 generation, who had sought homes in the outskirts, moving from Seoul to Gyeonggi-do and then again to Incheon, stopped their buying spree as loan interest rates soared sharply due to recent interest rate hikes. Areas in Gyeonggi-do such as Uiwang, Dongducheon, Hwaseong, Gwangmyeong, and Suwon, where housing prices had fluctuated due to actual residence and investment demand moving from Seoul to Gyeonggi-do, have turned to a downward trend this year, returning the gains made in housing prices.

◆ Apartment transaction prices in Songdo drop by 200 to 300 million KRW each = According to Real Estate R114 REPS on the 13th, as of the end of September this year compared to the end of October last year, apartment prices in Incheon fell by 2.99%. In terms of decline rate, it ranks second among the 17 cities and provinces nationwide, following Sejong (-4.31%). Over the past year, the only places nationwide where housing prices have turned downward are Sejong, Incheon, Daejeon (-2.17%), Daegu (-1.95%), and Jeollanam-do (-0.07%).

Until last year, Incheon had the highest housing price increase rate nationwide (34.52%). Incheon was a place where some investment demand entered first before the all-in demand moved. As Seoul housing prices surged, investment and actual residence demand moved to Gyeonggi-do, and from Gyeonggi-do, it moved again to Incheon. Last year, as multi-homeowners tried to reduce the number of houses due to taxes and other reasons, the 2030 generation absorbed these listings, and existing demand also exploded, causing Incheon housing prices to skyrocket.

However, the atmosphere has completely changed this year. Yeokyunghee, chief researcher at Real Estate R114, explained, "Not only new demand but also the real estate market recession and interest rate hikes have sharply reduced the 2030 generation who would effectively absorb listings amid the movement to reduce the number of houses," adding, "With increasing move-in volumes and demand disappearing, prices naturally declined."

In fact, in Songdo-dong, Yeonsu-gu, Incheon, cases of transactions at prices lower than previous deals are noticeable. The ‘Songdo The Sharp Master View’ 21-block apartment near Songdo Station, with an exclusive area of 84㎡, found a new owner on the 11th for 680 million KRW (23rd floor), down 218.5 million KRW from this year’s highest price of 898.5 million KRW. The ‘Songdo The Sharp Central City’ apartment in Songdo-dong, with an exclusive area of 59㎡, was traded on the 4th for 543 million KRW, dropping 337 million KRW from the record high of 870 million KRW reported in August last year.

◆ Regions leading Gyeonggi-do’s rise... returning gains = Apartment prices in Gyeonggi-do, which was an alternative residential area to Seoul, have also struggled this year. Over the past year, Gyeonggi-do apartment prices rose by only 0.08%, which is below the nationwide increase rate (0.46%). Among the 17 cities and provinces, excluding the five places where housing prices have turned downward, Gyeonggi-do has the smallest increase in housing prices. Uiwang-si stands out for its decline in Gyeonggi-do. Apartment prices in Uiwang-si, which soared last year due to expectations of GTX-C station stops, fell by 5.16%. Dongducheon-si and Hwaseong-si are also representative areas with severe housing price adjustments. During the same period, apartment prices in Dongducheon-si and Hwaseong-si fell by 2.01% and 1.41%, respectively. Gwangmyeong-si and Suwon-si, which are facing a surge in move-in volumes, also saw housing prices decline this year.

Researcher Yeokyunghee analyzed, "All regions with large declines in housing prices reflected various positive factors such as transportation benefits and urban development, and as housing prices rose in some parts of Gyeonggi-do like Uijeongbu, other areas rose in tandem. Suwon and Gwangmyeong have many large-scale move-in volumes since the end of last year, and currently, investment demand has no room to move, so the phenomenon of prices falling as much as they rose continues."

[Image source=Yonhap News]

◆ Interest rates fail to boost even with good news... unsold units also surge = As the market sorts out the wheat from the chaff in the subscription market, unsold housing units are also surging in the Gyeonggi region. According to the Ministry of Land, Infrastructure and Transport, from October last year to August this year, the cumulative number of unsold houses in Gyeonggi-do reached 22,245 units. Until just a year ago, there was a ‘blind subscription’ craze, but with interest rate hikes turning on red lights for funding, the subscription market has rapidly cooled down.

The area with the most accumulated unsold units is Anseong. So far, 5,888 households in Anseong have not found occupants. The industry evaluates that Anseong has poor accessibility to Seoul and little future investment value to stimulate investment demand. Yangju-si (3,847 households) and Hwaseong-si (2,408 households) are also accumulating unsold units. Yongin-si (2,506 households) is considered relatively accessible to Seoul among Gyeonggi regions, but unsold units have surged as move-in volumes have concentrated in Cheoin-gu, which is classified as an outskirts area even within Yongin-si. Pyeongtaek (1,561 households) is a region with industrial complex development and transportation benefits, but as the subscription market has frozen and housing price decline forecasts dominate, unsold units are increasing. The changed condition from last year, when there was subscription demand despite good news, is the interest rate hike. This proves that the biggest variable controlling the recent real estate market is the interest rate hike.

With the Bank of Korea’s Monetary Policy Committee likely to raise the base rate further within the year following the big step (0.50 percentage point increase) on the 12th, the current real estate market downturn is expected to continue until next year. Seo Jin-hyung, co-representative of the Fair Housing Forum (professor of MD Product Planning Business at Gyeongin Women’s University), predicted, "As long as the interest rate hike trend continues, the current cooling of the real estate market will last until the second half of next year," adding, "The subscription market will see intensified regional polarization depending on location."