"Soaring Interest Rates" ... Only Low-Price and Small Apartments Bought in Seoul Last Year

Over 40% of Transactions Under 600 Million Won
Transactions Under 60㎡ Exceed Half
Affordable Prices and Low-Interest Policy Loans Facilitate Access for Ordinary People

[Asia Economy Reporter Kim Hyemin] Amid last year's unprecedented transaction freeze, it was found that mostly low-priced or small apartments were traded in Seoul. This is interpreted as the buying demand concentrated on listings that could benefit from low-interest rate policies, as these apartments are relatively affordable for ordinary people and the burden of loan interest increased due to soaring interest rates.

According to data from the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 5th, among the 12,155 apartment transactions in Seoul last year, transactions with contract amounts of 600 million KRW or less accounted for 4,887 cases (40.5%). Compared to the previous year, 2021, when the total apartment transactions in Seoul were 41,948 and transactions under 600 million KRW accounted for only 28% (11,740 cases), the proportion has significantly increased.

By region, Guro-gu had the highest number with 490 cases, followed by Nowon-gu with 423 cases. Transactions under 600 million KRW were close to half of the total, with 2,315 cases in outer Seoul areas such as Geumcheon, Gwanak, Guro (Geum, Gwan, Gu), Nowon, Dobong, Gangbuk (No, Do, Gang), and Jungnang-gu. Excluding ultra-small areas like one-room apartments, general apartment transactions with exclusive areas over 50㎡ were counted at 1,255 cases.

Looking at price ranges, apartments priced over 900 million KRW up to 1.5 billion KRW accounted for 2,741 cases, or 22.5% of the total. Next were apartments priced over 600 million KRW up to 900 million KRW with 2,546 cases (20.9%). Apartments priced over 1.5 billion KRW had 1,981 transactions (16.2%), the smallest proportion.

Notably, last year in Seoul, apartments priced at 600 million KRW or less accounted for less than one in ten units. According to Real Estate R114, only 8.14% of all apartments in Seoul are priced at 600 million KRW or less. The largest share is apartments priced over 1.5 billion KRW, accounting for more than 30%.

Despite this situation, the concentration of transactions in low-priced apartments under 600 million KRW last year is interpreted as due to relatively lower loan burdens. In the loan market, "600 million KRW" is the threshold for eligibility for policy financial benefits such as the Bogeumjari Loan or Didimdol Loan. These loan products offer lower interest rates than general mortgage loans. The Loan-to-Value ratio (LTV) is also recognized up to 70%. Until November last year, before loan regulations were eased, the LTV cap for apartments priced over 600 million KRW in Seoul was between 20% and 50%.

From the second half of last year, as the housing price decline became more pronounced, cases of transactions lowered to 600 million KRW or less increased, which also had an impact. For example, in Sanggye-dong, Nowon-gu, Sanggye Jugong Complex 10, a 59㎡ exclusive area apartment sold for 760 million KRW in April 2021 but dropped to 550 million KRW in November last year. Similarly, in Mia-dong, Gangbuk-gu, SK Bukhan Mountain City with a 59㎡ exclusive area had transaction prices exceeding 600 million KRW until August last year but fell to 560 million KRW afterward. In Hawolgok-dong, Seongbuk-gu, Dream Forest Prugio with a 59㎡ exclusive area was traded at 823 million KRW in April last year but sold for 600 million KRW in December of the same year.

By area, small apartments with exclusive areas of 60㎡ or less accounted for 6,540 cases (53.8%), exceeding half of the total transactions. Apartments between 60㎡ and 85㎡ accounted for 31.4% (3,820 cases), meaning that apartments below the national standard size accounted for 85.2% of the total. Large apartments exceeding 135㎡ were only 576 cases, or 4.7% of the total. Kyunghee Yeo, Senior Researcher at Real Estate R114, said, "As buying sentiment weakened and transactions were mainly urgent sales, transactions concentrated on price ranges that are relatively accessible to ordinary people with lower loan interest burdens," adding, "The trend is unlikely to change significantly this year."