Has Buying Sentiment Hit Bottom? January Metropolitan Area Transactions Increased by 36%

Four Consecutive Months of Increase Since Last September
"Recovery Is Premature, but No More Transaction Cliff Expected"

[Asia Economy Reporter Kim Hye-min] The volume of apartment sales transactions in the Seoul metropolitan area in January this year increased by 36% compared to the previous month. This marks the fourth consecutive month of growth, with analysts attributing the rebound in transaction volume to the government's various regulatory relaxations.

On the 16th, Real Estate R114 analyzed actual transaction data from the Ministry of Land, Infrastructure and Transport and found that the number of apartment sales contracts signed in the Seoul metropolitan area last month totaled 6,647. Seoul and Incheon recorded over 1,000 sales contracts for the first time in seven months since June last year, while Gyeonggi Province saw a 35% increase from the previous month, with 4,264 transactions. The reporting deadline for January contracts is the end of this month, so the number of transactions is expected to rise further.

Sixty percent of the January transaction volume consisted of mid-to-low priced apartments priced between 300 million KRW and 900 million KRW. This increase is understood to be due to complexes that were priced in the 1 billion KRW range during the 2021 housing price surge being sold off at prices below 900 million KRW.

In Seoul, buying demand for apartments priced below 900 million KRW was concentrated mainly in mid-to-low priced apartment dense areas such as Nowon, Dobong, and Seongbuk districts. In the Gangnam 3 districts, transactions increased mainly in redevelopment project complexes and large complexes, with a slight rise in the proportion of apartments priced over 1.5 billion KRW. However, the price drop was significant, with Eunma in Daechi-dong, Gangnam-gu, which was priced around 2.4 billion KRW in January last year for a 76㎡ exclusive area, trading at around 1.8 billion KRW, and large complexes in Songpa-gu, which previously traded at an average of 2.1 to 2.3 billion KRW for an 84㎡ exclusive area, now trading between 1.7 and 1.8 billion KRW.

In Gyeonggi Province and Incheon, transactions priced between 300 million KRW and 600 million KRW accounted for more than half of the total.

The rebound in transaction volume appears to be influenced by expectations of policy benefits such as the allowance of mortgage loans for apartments priced over 1.5 billion KRW implemented in December last year, the uniform application of a 50% loan-to-value (LTV) ratio for debt-to-income ratio for non-homeowners in regulated areas, and the lifting of regulations in the Seoul metropolitan area.

As transaction volume increases, expectations for a recovery in buying demand are also rising. The special Bogeumjari Loan was launched at the end of last month, and mortgage loans for multi-homeowners and rental/sales business operators in regulated areas are scheduled to be permitted next month, which is positive news.

However, some argue that it is premature to conclude that a recovery trend has arrived based on January's transaction volume. Although transaction volume has increased for four consecutive months, it is only about 30% of the average January monthly transaction volume (22,182 transactions) in the Seoul metropolitan area over the past three years.

Baek Saerom, lead researcher at Real Estate R114, said, "Considering the trend, the possibility of further declines like the transaction cliff in the second half of last year is low," but added, "Since downward transactions focused on urgent sales are still ongoing and considering the burden of interest repayments and the economic recession, it is more likely that transactions will gradually increase rather than buying sentiment reversing sharply in the short term."