Analysis of 64 Apartment Transactions Nationwide on January 1-2
Keywords: 'Price Decline' and 'Direct Transactions'
Yongin, Goyang, etc. Return to 2020 Prices
[Asia Economy Reporter Onyu Lim] As high interest rates cause house prices to plummet, the real estate market has entered a deep freeze. While there are many sellers, buyers are scarce, causing transactions to come to a halt. Nevertheless, some people are signing contracts at the very beginning of the new year. An analysis of the first apartment sales contracts of the year reveals a clear trend of house prices returning to 2020 levels, along with an increase in the proportion of direct transactions.
According to the Ministry of Land, Infrastructure and Transport's Real Transaction Price Disclosure System, a total of 64 apartment sales contracts were signed nationwide over the two days of January 1 and 2. Under the "Real Estate Transaction Reporting Act," there is a 30-day reporting period for real estate transactions, so some transactions may not yet be registered.
◆ House prices have fallen to 2020 levels = An analysis of major contracts with sales prices over 200 million KRW showed a clear downward trend. Complexes that set record highs in 2021, when house prices were soaring, are now trading at 2020 price levels.
The apartment with the highest transaction price was Jiseok Maeul The Credence in Sahang-dong, Giheung-gu, Yongin, Gyeonggi Province (554 households), 84㎡, which sold for 500 million KRW. The same size apartment in this complex was sold at a record high of 619 million KRW in July 2021. At that time, the rate of increase in house prices in the metropolitan area was the highest in 13 years and 1 month since June 2008. However, due to the sharp interest rate hikes starting last year, house prices have fallen back to December 2020 levels.
The apartment with the second highest transaction amount was Byeolbit Maeul Geonyeong Complex 10 in Hwajeong-dong, Deogyang-gu, Goyang, Gyeonggi Province (1,080 households), 84㎡, which sold for 475 million KRW. This apartment also peaked at 810 million KRW in July 2021. However, house prices have dropped sharply and returned to June 2020 levels. A representative from A Real Estate Agency in Hwajeong-dong said, "Because there are no buyers, the transaction freeze is severe, so only urgent sales with significantly lowered asking prices are being sold."
◆ Direct transactions account for 45%... "Many gift-like sales during downturn" = In the first apartment sales transactions of the new year, the proportion of direct transactions was quite high. Of the total 64 transactions, 29 (45%) were direct transactions. Unlike mediated transactions, direct transactions occur without intermediaries. Typically, these involve transactions between special relations such as spouses or children. Because these are gift-like transactions, they tend to be priced lower than market value.
In fact, the apartment with the third highest price, Yeongtong I-Park Castle Complex 2 in Mangpo-dong, Yeongtong-gu, Suwon (1,162 households), 59㎡, was contracted through a direct transaction. The transaction amount was 392 million KRW, which is 178 million KRW less than the current lowest asking price of 570 million KRW. Since the actual transaction price is significantly lower than the asking price, it is presumed to be a transaction between special relations.
Under current law, if the difference between market price and transaction price is less than 30% of the market price or 300 million KRW, the transaction is recognized as a normal sale and gift tax is not imposed. At times like now, when price declines are large, such gift-like sales are sometimes conducted for tax-saving purposes.
As the proportion of direct transactions in nationwide apartment sales has recently increased significantly, the Ministry of Land, Infrastructure and Transport is conducting a high-intensity planned investigation into abnormal high- and low-priced direct transactions between special relations. A ministry official said, "Not all low-priced direct transactions can be deemed illegal, but transactions conducted at prices significantly below market value can distort market prices amid transaction stagnation, causing market instability and other side effects."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
