[2022 Real Estate] Apartment Prices Returned to Two Years Ago

Seoul Apartment Prices Fall for '30 Consecutive Weeks'
Gyeonggi and Incheon Areas 'Drop as Much as They Rose'

View of an apartment complex from Namsan, Seoul / Photo by Yonhap News

[Asia Economy Reporter Noh Kyung-jo] Seoul apartment sale prices have fallen to levels seen two years ago. Due to weakened buying demand and a transaction freeze that began in the second half of last year, nationwide apartment sale prices have also turned negative for the first time in nine years. Transaction volumes have hit their lowest point since related statistics began being compiled in 2006. As warnings of a hard landing in the real estate market grow louder, the government is actively seeking market normalization by easing regulations on taxes and loans for multi-homeowners. However, the market widely expects the price decline to continue into next year.

According to the Korea Real Estate Board’s weekly apartment price trend report for the third week of December (as of the 19th), Seoul apartment prices fell 0.72% last week, marking the largest drop since price surveys began in May 2012. The downward trend has continued for 30 consecutive weeks since the end of May.

Most notably, the cumulative change rate of Seoul apartment prices this year is -6.51%, nearly matching last year’s change rate of 6.55%, making the phrase "prices have fallen as much as they rose" quite fitting. By district, apartment prices in Nowon-gu (9.79% → -10.94%), Dobong-gu (6.39% → -10.72%), Seongbuk-gu (5.58% → -9.31%), Gangbuk-gu (3.87% → -8.74%), and Seodaemun-gu (4.71% → -8.22%) have returned the gains made last year.

Given this situation, complexes that have changed hands at prices lower than the lowest prices two years ago are also noticeable.

According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system, a 59.85㎡ unit in E-Pyeonhansesang Sinchon Complex 1 in Bukahyeon-dong, Seodaemun-gu, was traded on the 26th of last month for 1.045 billion KRW. This is the lowest price of the year and 100 million KRW lower than the 2020 low of 1.15 billion KRW.

A unit measuring 84.244㎡ in Godeok Gracium, Godeok-dong, Gangdong-gu, was traded on the 6th of last month for 1.39 billion KRW, falling 100 million KRW below the lowest price two years ago (1.49 billion KRW). A 59.028㎡ unit was also sold for 1.1 billion KRW on the 10th of this month, lower than the 2020 low of 1.245 billion KRW.

The indicators worsen as one moves outside Seoul. The annual cumulative change rate for apartments in the metropolitan area is -8.28%, with double-digit declines in districts such as Yeongtong in Suwon (-14.21%), Gwangmyeong (-13.95%), Uiwang (-13.80%), Yeonsu in Incheon (-13.64%), Hwaseong (-12.43%), Yangju (-12.32%), and Seo in Incheon (-11.85%). Last year, Gyeonggi and Incheon saw rapid increases of 20.76% and 22.56%, respectively.

Experts cite the reason for comparing real transaction prices to those two years ago as the implementation of the "Three Lease Laws" in 2020 (Jeonse and monthly rent reporting system, rent ceiling system, and contract renewal request right). These laws caused a sharp rise in Jeonse prices and a corresponding increase in sale prices, distorting the market. The government has also restored the official price realization rate to the level of two years ago.

The downward trend in real estate prices is expected to continue into next year. The key factor will be none other than the "base interest rate." However, it is generally difficult to expect a rebound even if the rate of decline slows. Lim Byung-chul, head of the research team at Real Estate R114, said, "Due to the base interest rate hike trend and concerns about an economic recession, buying demand is unlikely to recover for a considerable period next year as well."