"House Prices Dropped, So Let's Move"... Rising Popularity of New and Small-to-Medium Apartments

Due to the continuous decline in housing prices, there is an increasing demand for switching to newly built and larger apartments.

On the 26th, Real Estate R114 analyzed the proportion of apartment transactions by building age through the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system. The results showed that the nationwide share of transactions for apartments aged 5 years or less increased over the past year. As of January last year, transactions for apartments 5 years old or less accounted for only 9.7% of total transactions nationwide, but last month, this figure more than doubled to 19.6%.

During the same period, the share of transactions for apartments 5 years old or less in the Seoul metropolitan area also nearly doubled, rising from 11.9% to 22.3%. In Gyeonggi Province, it increased from 9.8% to 23.5%, and in Incheon, from 4.1% to 20.6%, showing a nationwide increase in the proportion of transactions for newly built apartments. In provincial areas, it also rose from 9.0% to 17.9% within a year.

On the other hand, the share of transactions for older apartments built over 30 years ago sharply decreased. Comparing January last year and January this year, the Seoul metropolitan area dropped from 14.9% to 10.4%, and provincial areas fell from 17.0% to 12.5%. Nationwide, it declined from 16.5% to 11.7%. In particular, Incheon showed the largest decrease, falling from 32.3% to 14.0%.

However, Seoul, where reconstruction investment issues have a significant impact, shows an opposite trend. The share of transactions for apartments over 30 years old increased from 12.9% to 21.1% during the same period.

A real estate agency in Seoul.
Photo by Yonhap News

Supported by demand to switch to larger apartment sizes, the share of transactions for small apartments has decreased, while transactions for medium and larger apartments have increased. In January last year, the share of transactions for apartments with exclusive use areas of 60㎡ or less (small) nationwide accounted for 51.5%, more than half of all transactions, but last month, it decreased to 41.5%. Conversely, transactions for apartments with exclusive use areas over 60㎡ and up to 85㎡ (medium-sized) noticeably increased from 40.9% to 49.3% during the same period.

In the Seoul metropolitan area, the share of small apartment transactions decreased from 52.1% in January last year to 38.8% this January, while medium-sized transactions increased from 36.7% to 49.8%. Provincial areas showed the same trend, with small apartments decreasing from 51.4% to 43.1% and medium-sized apartments increasing from 42.3% to 48.9%.

The significant increase in the share of transactions for newly built and medium-sized apartments appears to be largely influenced by the decline in housing prices. According to Real Estate R114 REPS data, the average sale price per 3.3㎡ of apartments within 5 years of occupancy nationwide fell from 32.23 million KRW in January last year to 31 million KRW last month. During the same period, prices also declined in Seoul (56.36 million KRW → 54.33 million KRW), Gyeonggi (29.84 million KRW → 28.08 million KRW), and Incheon (23.06 million KRW → 21.79 million KRW).

Looking at prices by size, the average sale price per 3.3㎡ of apartments 60㎡ or less nationwide dropped from 20.54 million KRW in January last year to 19.73 million KRW last month, and apartments over 60㎡ up to 85㎡ also fell from 21.64 million KRW to 20.92 million KRW during the same period.

Yeokyung Lee, Senior Researcher at Real Estate R114, explained, “With an increase in occupancy supply in the Seoul metropolitan area and other regions, the supply of newly built apartments within 5 years of completion has become abundant. Amid the housing price decline, prices for new listings have also lowered, and relatively larger apartment sizes have become more affordable, lowering the market entry barriers.”