Seoul Apartment Transactions Reach 2,000 Units... Highest in 1 Year and 4 Months

February Apartment Sales Volume Recorded at 2,073 Transactions
First Time Above 2,000 Since October 2021
Hope for Housing Price Recovery, but Some See It as a 'Temporary' Boom

The volume of apartment transactions in Seoul in February surpassed 2,000 units for the first time in 1 year and 4 months. Thanks to deregulation measures under the January 3rd policy, the real estate market has escaped the transaction freeze and regained vitality after a long time. However, it remains unclear whether the increase in transaction volume is a 'flash' effect or will establish itself as a 'trend.' While expectations for a soft landing in the real estate market are rising, some forecasts suggest it is too early to claim the bottom has been reached.

According to the Seoul Real Estate Information Plaza on the 15th, the number of apartment sales transactions in Seoul in February was recorded at 2,073 units. This is the first time in 16 months since October 2021 that more than 2,000 apartments changed hands in Seoul in a single month. The volume of apartment transactions in Seoul had plummeted to 559 units in October this year due to the real estate market tightening caused by the U.S. interest rate hikes, but it has nearly quadrupled in just four months.

The sharp increase in transaction volume is attributed to the government's deregulation efforts to prevent a hard landing in the real estate market. Through the January 3rd policy, all areas except the three Gangnam districts and Yongsan-gu were removed from regulated zones, and various regulations related to taxes, loans, and transactions were eased. Previously, from December last year, the loan-to-value ratio (LTV) for mortgage loans for non-homeowners in regulated areas was raised to 50%, and mortgage loans were allowed even for properties exceeding 1.5 billion KRW.

As a result, buyer sentiment recovered, raising expectations for a 'bottoming out,' and low-priced, high-quality urgent sale properties were quickly depleted, causing transaction volumes to soar. As the market regained momentum, prices also began to stir. According to the Korea Real Estate Board, apartment prices in Seoul in the first week of March fell by 0.21%, a smaller decline compared to the previous week (-0.24%), marking the fourth consecutive week of narrowing losses. Apartment prices in Songpa-gu rose by 0.03%, returning to an upward trend for the first time in 11 months since the first week of April last year.

In the market, apartment transaction volume is considered a representative leading indicator that can predict the direction of housing prices. However, it is uncertain whether the recovery in transaction volume is just a 'flash effect' due to deregulation or will become a trend signaling a recovery in the real estate market. Although the transaction volume exceeded 2,000 units, it is still far below the average transaction volume of around 5,000 units since 2012.

The Bank of Korea also stated in its Monetary and Credit Policy Report released on the 9th, "Considering the elevated interest rate levels, expectations of falling housing prices, and the housing market cycle, housing prices are expected to decline further this year," adding, "Especially given the high persistence of housing price expectations, the expectation of further declines is likely to continue for a considerable period, acting as a downward factor on housing prices."

Yoon Ji-hae, head of the Research Team at Real Estate R114, said, "While there is optimism about market recovery due to deregulation, concerns about economic slowdown remain. After urgent sale properties are depleted, if prices rise locally for a short period, transactions are likely to slow down again, continuing this pattern. Apartment prices in the metropolitan area are expected to maintain a downward trend within a box range for some time."