37.7% of Apartment Transactions Nationwide Fell by More Than 5%
In Seoul, Over Half of Transactions Fell by More Than 5% Compared to Previous Deals
[Asia Economy Reporter Kim Min-young] In the fourth quarter, the proportion of apartment sales transactions in Seoul that dropped by more than 5% compared to the previous transaction reached an all-time high. Due to high interest rates and expectations of further price declines, an unprecedented drought in transactions continues, with the market atmosphere intensifying around falling-price transactions where only urgent sales are barely completed. With additional interest rate hikes likely, the current market situation dominated by falling-price transactions is expected to persist for some time.
On the 21st, Zigbang conducted a comprehensive survey of apartment sales data from the Ministry of Land, Infrastructure and Transport's Real Transaction Price Disclosure System from the first quarter of 2013 to the fourth quarter of this year. Among the 322 apartment transactions in Seoul in the fourth quarter of this year, 166 transactions fell by more than 5%, accounting for 51.6% of the total. This is the first time since the introduction of the real transaction price reporting system that transactions with significant price drops have exceeded half of all transactions. When including all transactions that fell by more than 1%, the total reaches 65.5%, meaning nearly 7 out of 10 transactions were conducted at reduced prices.
In the fourth quarter of this year, there were 15,540 apartment transactions nationwide, of which 5,863 transactions (37.7%) fell sharply by more than 5%. Adding 2,440 transactions that fell between 1% and 5%, the total proportion of falling-price transactions exceeded half at 53.4%. The previous highest proportion of transactions falling by more than 5% nationwide and in Seoul was in the fourth quarter of 2008 during the financial crisis, with 32% nationwide and 47% in Seoul. Compared to that period, the current fourth quarter rates are about 4 to 5 percentage points higher.
Falling-price transactions are occurring nationwide. As of the third and fourth quarters, the proportion of falling-price transactions exceeding the margin of error (±1%) is over 50% in the metropolitan area, Sejong City, and major metropolitan cities nationwide. Particularly, the metropolitan area, Daejeon, Sejong, and Daegu show high proportions of falling-price transactions; except for Daegu, these areas recently experienced strong buying demand from people in their 20s and 30s.
The intensifying trend of falling-price transactions is due to the cessation of housing demand, signaling a prolonged slump in the apartment market. As the general downward trend continues, the gap between the desired prices of buyers and sellers widens, and the unprecedented drought in transactions remains unresolved.
In the third quarter of 2022, nationwide apartment transactions totaled 50,017, with 1,927 in Seoul. This is the lowest level since the housing transaction reporting system was introduced in 2006. The average quarterly transaction volume from 2006 to the second quarter of 2022 was approximately 144,000 nationwide and about 18,000 in Seoul. Compared to these averages, the third quarter transaction volume in Seoul was only about one-tenth of the historical average.
As long as the high interest rate and high inflation environment remain firm, the market atmosphere dominated by falling-price transactions where "only urgent sales are possible" is expected to continue. Ham Young-jin, Head of the Big Data Lab, predicted, "Despite the government's easing measures to prevent a hard landing, if both sellers and buyers continue to bear high housing finance costs, the current market situation dominated by falling-price transactions is likely to persist for some time."
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