A red light is on at a traffic signal near an apartment in downtown Seoul. (Photo by Asia Economy DB)
[Asia Economy Reporter Ryu Tae-min] "Transactions have noticeably decreased. Since house prices keep falling, no one is looking for anything except urgent sale properties listed at low prices." (Representative of real estate agency A in Sincheon-dong, Songpa-gu, Seoul)
The downward trend in house prices in Songpa-gu is unusual. Due to consecutive interest rate hikes, the burden of loan interest has increased, housing transactions have frozen, and demand has sharply declined. With sale prices falling for 28 consecutive weeks, recently, transactions below the so-called 'loan prohibition line' of 1.5 billion KRW have been occurring frequently.
According to the weekly apartment price trend survey by the Korea Real Estate Board on the 8th, apartment sale prices in Songpa-gu fell by 2.22% last month. This is 0.23 percentage points larger than the decline in October (-1.99%), and with 28 consecutive weeks of decline, prices in Songpa-gu have dropped by a cumulative 5.60% since the beginning of this year.
The increasing decline in Songpa-gu is attributed to the consecutive interest rate hikes. Song Seung-hyun, CEO of City and Economy, explained, "Apartment complexes in Songpa-gu have high price levels, so buyers face greater financial burdens," adding, "Homeowners also face increased interest burdens from existing credit loans for home purchases, leading many to put up urgent sale properties."
The characteristic of being a bed town with large-scale complexes is also cited as a background for the sharp decline. Song said, "Songpa-gu has many large complexes with frequent transactions, so price reflection is relatively fast," and "Since prices rose steeply last year, the market has turned bearish, causing prices to fall sharply."
As the downward trend deepens, recently, small apartments trading below the 'loan prohibition line' of 1.5 billion KRW have appeared. According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, the Parkrio apartment in Sincheon-dong, Songpa-gu, Seoul, considered the 'leading apartment' in Songpa-gu, with an exclusive area of 59.95㎡, changed hands for 1.48 billion KRW on the 18th of last month. The highest price for this size was 2 billion KRW in October last year, meaning the price dropped by 520 million KRW in 1 year and 1 month. Notably, this size falling below the 'loan prohibition line' of 1.5 billion KRW is the first time in 2 years and 5 months since June 2020.
The price decline for the 84㎡ size in the same complex is also steep. On the 1st of last month, the Parkrio 84.9㎡, considered the 'national standard size,' was traded at 1.77 billion KRW, down 750 million KRW from the highest price of 2.52 billion KRW. Currently, the asking price for Parkrio is at least 1.7 billion KRW for the 84㎡ size, and listings for the 59㎡ size are available even at 1.5 billion KRW.
The 'Elite' complex, considered a leading apartment in Jamsil, is also struggling. Jamsil Els 59.96㎡ in Jamsil-dong, Songpa-gu, was traded at 1.595 billion KRW on the 10th of last month, dropping to the 1.5 billion KRW range for the first time in two years. The 84㎡ size in the same complex was traded at 1.9 billion KRW on the 14th of last month, 800 million KRW lower than its highest price of 2.7 billion KRW.
Nearby, Risence 84.9㎡ was traded at 1.975 billion KRW on the 14th of last month, down 675 million KRW from its highest price of 2.65 billion KRW, and Trizium 84.9㎡ was sold for 1.79 billion KRW on the 28th of last month, 630 million KRW lower than its highest price of 2.42 billion KRW. A representative from real estate agency B in Jamsil-dong said, "Since house prices rose so much last year, there is less actual resident demand than before, causing listings to accumulate," adding, "There are quite a few urgent sale properties listed at prices 200 to 300 million KRW lower than recent market prices."
This trend is also seen in reconstruction complexes. The Olympic trio in Bangi-dong, Olympic Athlete Village 83㎡, changed hands for 1.87 billion KRW in October, down 550 million KRW from the previous highest price of 2.42 billion KRW, and Olympic Family Town 84.7㎡ in Munjeong-dong was traded at 1.5 billion KRW in October, 435 million KRW lower than the previous highest price of 1.935 billion KRW.
A representative from real estate agency C in Bangi-dong said, "Contrary to expectations earlier this year, the easing of reconstruction-related regulations has been sluggish, frustrating many homeowners," and "As local house prices fall and listings increase, demand is lacking, and transactions have practically stopped."
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