[Housing Price Rebound vs. Further Decline] ③ 'Daejang Apartment' 3-Month Drop Narrows... Reconstruction Expectations Rise

The price decline of so-called ‘leading apartments’ that drive local market prices is slowing down. Although the price drop of leading apartments reached an all-time high last year due to continuous interest rate hikes and economic downturn, the recent large-scale deregulation has led to a more gradual decline. However, some experts say it is still too early to consider this a full recovery in housing prices.

According to the monthly housing trend report released by KB Kookmin Bank on the 6th, the ‘KB Leading Apartment 50’ index fell by 0.84% in February compared to the previous month. This is a decrease of 1.33 percentage points, more than half less than the previous month’s decline (-2.17%). This index has seen a reduction in the rate of decline for three consecutive months since recording the largest drop ever of 3.14% in November last year.

The KB Leading Apartment index selects the top 50 apartment complexes nationwide by market capitalization and reflects the rate of change in market capitalization. It is highly sensitive to price fluctuations and is mainly used as a leading indicator to anticipate the housing market. Major complexes in the Gangnam area, such as Jamsil Jugong 5 Complex, Acro River Park, and Eunma Apartments, are included in the index.

The reduced rate of decline in this index is interpreted as an effect of the government’s 1.3 real estate measures. Most of Seoul’s regulated areas have been lifted, and loans for multi-homeowners have been eased, resulting in a decrease in urgent sale transactions. A representative from A Real Estate Agency near Helio City in Garak-dong, Songpa-gu, Seoul, which ranks first in market capitalization, said, "Prices fell significantly last year, and with deregulation, inquiries from buyers have increased a lot since the beginning of this year." He added, "Among them, there seem to be quite a few buyers looking to ‘trade up’ to higher-grade areas."

In particular, the Gangnam 3 districts (Gangnam, Seocho, Songpa-gu), where more than half of the Leading 50 apartments are concentrated, have recently shown a sharp decrease in the rate of price decline due to the severe price drops caused by last year’s interest rate hikes. According to the Korea Real Estate Board, the apartment price change rate in the southeastern Seoul area recorded -0.75% last month, about half of the previous month’s (-1.38%). Compared to December last year (-2.05%), when the decline was most severe, the drop has decreased by 1.30 percentage points in two months.

Song Seung-hyun, CEO of Urban and Economy, analyzed, "The areas that experienced significant price adjustments last year can be seen as having a reduced decline due to the base effect (an economic phenomenon where indicators are exaggerated or contracted depending on the reference point)." He added, "Additionally, the gap between buyers and sellers has narrowed due to continuous price drops, which has also contributed to the activation of transactions."

Falling actual transaction prices are showing signs of recovery. According to the Ministry of Land, Infrastructure and Transport’s Real Transaction Price Disclosure System, the sale price of an 84.99㎡ (exclusive area) unit in Helio City, Garak-dong, Songpa-gu, dropped from 1.8 billion KRW in November last year to 1.53 billion KRW in January this year but rose again to 1.89 billion KRW in February. Similarly, a unit of 84.93㎡ in Raemian Prestige, Banpo-dong, Seocho-gu, which was traded at 3.65 billion KRW in November last year, fell to 3.1 billion KRW in December but recovered to 3.3 billion KRW last month.

Expectations Rise for Reconstruction Complexes Amid Deregulation... “Still Too Early to Call It a Recovery”

There is also analysis that increased expectations for reconstruction complexes have played a role. Major reconstruction complexes in Seoul, where layered regulations have been lifted, are gaining momentum in their projects, attracting the interest of buyers. According to Real Estate R114, the price change rate for reconstruction apartments in Seoul recorded -0.12% last month, a clear reduction in the rate of decline compared to -0.35% in December last year and -0.28% in January.

In fact, actual transaction prices of major reconstruction complexes are also recovering. A 76.79㎡ unit in Eunma Apartments, Daechi-dong, Gangnam-gu, changed hands for 2.03 billion KRW last month, marking the highest price since September last year (2.14 billion KRW). A representative of B Real Estate Agency in nearby Daechi-dong said, "As news spread that reconstruction regulations have been lifted and projects are accelerating, inquiries have steadily increased." He added, "Since demand is high, I don’t expect prices to fall further."

The 82.61㎡ unit in Jamsil Jugong 5 Complex, Jamsil-dong, Songpa-gu, was traded for 2.506 billion KRW last month, recovering to the 2.5 billion KRW range for the first time since September last year. A 108.28㎡ unit in Mokdong New Town 14 Complex, Sinjeong-dong, Yangcheon-gu, was traded for 1.75 billion KRW at the end of last month, up 150 million KRW from the price in October last year (1.6 billion KRW).

However, there are opinions that it is premature to view this trend as a full recovery in housing prices. CEO Song Seung-hyun said, "While it is true that the rate of decline has recently decreased, it is difficult to say that the downward trend itself has been broken." Ye Kyung-hee, senior researcher at Real Estate R114, said, "It is true that the market atmosphere has changed due to deregulation policies, but it is still too early to conclude that it is a recovery." She added, "It is uncertain whether this will lead to a buying spree, and since the perception of high price points still remains, more time will be needed before a rebound can be expected."