"Did It Fall Too Much?"... Decline in Seoul Apartment Sale and Jeonse Price Drops Slows Down

Apartment area viewed from Namsan [Photo by Yonhap News]

As the volume of apartment transactions in Seoul increased mainly due to urgent sales, the decline in Seoul apartment sale and jeonse prices has narrowed.

According to Real Estate R114 on the 5th, this week, Seoul apartment sale prices fell by 0.03%, reducing the drop to less than half compared to the previous week (-0.08%). This is the lowest since September 16 last year (0.01% decline). Apartment prices in new towns and Gyeonggi·Incheon also fell by 0.03%.

In Seoul, urgent sales were mainly transacted in areas such as Gangdong, Songpa, and Nowon-gu, where price adjustments were significant last year. Guro-gu saw the largest price drop at 0.13%. This was followed by ▲Dongdaemun -0.10% ▲Yangcheon -0.09% ▲Gangnam -0.08% ▲Mapo -0.07% ▲Seongbuk -0.06% ▲Nowon -0.04% ▲Gangdong -0.02%.

In new towns, the Ministry of Land, Infrastructure and Transport’s announcement to promote the Special Act on 1st Generation New Towns had little impact, and the 1st generation new towns showed weak prices. ▲Pyeongchon (-0.18%) ▲Ilsan (-0.04%) ▲Bundang (-0.03%) ▲Sanbon (-0.03%) ▲Dongtan (-0.03%) declined, while the other new towns recorded stable prices (0.00%).

In Gyeonggi·Incheon, prices fell in the order of ▲Suwon (-0.15%) ▲Gimpo (-0.09%) ▲Siheung (-0.07%) ▲Uijeongbu (-0.07%) ▲Anseong (-0.07%) ▲Namyangju (-0.06%) ▲Bucheon (-0.06%) ▲Paju (-0.06%). In Suwon, Yeongtong Sannamusil Jugong Complex 5 and Cheoncheon Samho Jindeok dropped by 10 to 20 million KRW, and in Gimpo, Sau Hyundai and Bukbyeon Pungnyeon Complex 2 Cheonggu Hanra fell by 5 to 10 million KRW respectively.

The jeonse market also changed its atmosphere due to the spring moving season and institutional improvements such as the tenant’s jeonse deposit refinancing loan. Seoul jeonse prices fell by 0.08%, reducing the decline compared to last week (-0.16%). New towns and Gyeonggi·Incheon fell by 0.04%, significantly reducing the drop compared to the previous week (-0.14%).

In particular, jeonse prices in Gangnam-gu, Seoul, fell by 0.22%, showing the largest decline. This is attributed to the move-in of Gaepo Xi Residence (3,375 households), which started last month. Raemian Daechi Palace Complex 1, Seongyeong Complex 1 and 2, and Dogok Complex 2 I-Park saw jeonse prices drop by 25 to 100 million KRW.

From March, the loan-to-value (LTV) ratio limit for mortgage loans for multi-homeowners and rental business operators increased to 30-60%. In addition, restrictions on mortgage loans for the purpose of returning tenant deposits (hereinafter, mortgage loans), the abolition of the mortgage loan limit for living stabilization funds, the application of the total debt service ratio (DSR) at the time of existing loans for mortgage loan refinancing (1 year), and the abolition of the 600 million KRW mortgage loan limit for real demand borrowers in regulated areas are creating an atmosphere of normalizing loan regulations that have constrained demand.

Yoon Ji-hae, chief researcher at Real Estate R114, explained, "However, considering that many multi-homeowners are liquidity-constrained due to the government’s total debt service ratio (DSR) regulations and that a significant portion of the urgent sales currently on the market are from multi-homeowners, it seems difficult to assign meaning beyond the perspective of excessive loan regulation normalization."