A red light is on at a traffic signal near an apartment in downtown Seoul. (Photo by Asia Economy DB)
[Asia Economy Reporter Ryu Taemin] The prices of so-called 'leading apartments' that drive local market prices are showing a sharp decline. Due to interest rate hikes and economic downturns deepening the housing transaction cliff, as well as a decrease in the preference for a 'smart single home' seeking high-priced apartments in the Gangnam area, there is an increasing number of transactions where prices have dropped by hundreds of millions of won.
According to the monthly housing trend report released by KB Kookmin Bank on the 25th, the 'KB Leading Apartment 50' index for December fell by 2.58% compared to the previous month. This is the second-largest drop since the index began in December 2008, following last month's -3.14%. The index recorded -0.24% in July, turning negative, and has fallen by 9.55% in the second half of this year alone. Compared to the 1.43% drop in Seoul apartment sale prices this month, the decline in leading apartments is about twice as large.
The KB Leading Apartment Index selects the top 50 apartment complexes nationwide by market capitalization and shows the rate of change in market capitalization. It is highly sensitive to price fluctuations and is mainly used as a leading indicator to forecast the housing market. Major complexes in the Gangnam area, such as Jamsil Jugong 5 Complex, Acro River Park, and Eunma Apartments, are included in large numbers.
Until the first half of this year, the index showed an accumulated increase of 1.81%, indicating an upward trend. However, in the second half, as buyers began to avoid apartments in the Gangnam area, sales transactions decreased and prices continued to fall, deepening the downward trend of the leading index.
According to weekly apartment price trend data from the Korea Real Estate Board, the apartment sale price change rate in Songpa-gu has been negative for 31 consecutive weeks since the third week of May, falling by 7.83%. In Gangnam-gu, prices have fallen for 25 consecutive weeks, down 4.25%, while Seocho-gu (19 consecutive weeks, -2.58%) and Gangdong-gu (28 consecutive weeks, -6.29%) also continued to decline.
In fact, falling transactions are occurring frequently in various locations. According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system, an 84.9㎡ (exclusive area) unit in Helio City, Garak-dong, Songpa-gu, changed hands for 1.66 billion won on the 22nd of last month, dropping 710 million won from the highest price of 2.37 billion won in January. A similar 84.9㎡ unit in Trizium, Jamsil-dong, Songpa-gu, was sold for 1.79 billion won on the 28th of last month, down 510 million won from the highest price of 2.3 billion won six months ago.
The concern over reverse jeonse (key money deposit) difficulties is also believed to have an impact. As jeonse prices have fallen more than two years ago, landlords find it difficult to return the reduced jeonse deposits to tenants, leading to cases where properties are put up for urgent sale at prices lower than market value. According to the Korea Real Estate Board, Seoul apartment jeonse prices fell by 1.13% in the third week of December. Especially in the Gangnam area, including Seocho-gu (-1.04%) and Gangnam-gu (-1.07%), jeonse prices also showed a significant decline, dropping more than 1%.
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