"Apartment Sale Rights Sell Better When More Expensive"…Up 15.4% Compared to Previous Year

Q1 Pre-sale (Move-in) Rights Transactions 11,783 Cases
"Housing Price Recovery, Increase in High-priced Shares Due to High Pre-sale Prices"

In the first quarter of this year, transactions of pre-sale rights centered on local areas and apartments priced over 500 million KRW increased. This is analyzed to be due to rising construction costs, high pre-sale prices, and a cooling of real estate project financing (PF) loans, which led to a decrease in supply and increased demand for transactions of pre-sale rights or move-in rights.

Apartment complex in Songpa-gu, Seoul. / Photo by Yonhap News

On the 25th, Woori Bank's Asset Management Consulting Center analyzed the nationwide apartment pre-sale (move-in) rights transaction volume from the Ministry of Land, Infrastructure and Transport, reporting that the transaction volume in the first quarter of this year was 11,783 cases. This is a 15.4% increase compared to 10,205 cases in the same period last year. It also rose 26% compared to the previous quarter.

The region with the highest volume of pre-sale (move-in) rights transactions was Gyeonggi, recording 1,647 cases. The second place was Gyeongbuk with 1,613 cases, showing a sharp increase of 65.9% compared to the previous quarter (972 cases). Chungnam (1,605 cases) and Gyeongnam (1,353 cases) also recorded over 1,000 transactions within the quarter.

The total pre-sale (move-in) rights transaction volume in the metropolitan area remained at 2,452 cases. Except for Gyeonggi, Incheon (668 cases) and Seoul (137 cases) had relatively low transaction volumes. In contrast, local areas accounted for 9,331 cases, making up 79% of the total, overwhelmingly surpassing the metropolitan area’s 21% share.

The low proportion of pre-sale (move-in) rights transactions in the metropolitan area appears to be due to the high capital gains tax rates acting as a hurdle, given the characteristics of high capital gains from pre-sale rights resale in the metropolitan area (70% for holding periods under one year, 60% otherwise). Additionally, the low progress rate of new pre-sale supply, which serves as the source for pre-sale rights resale, also contributed.

Meanwhile, looking at the transaction share by price range, low-priced transactions decreased while high-priced transactions increased compared to last year. Transactions under 500 million KRW accounted for the majority at 71.29% last year and 63.25% this year, but their share decreased. Conversely, transactions exceeding 500 million KRW increased from 28.71% last year to 36.75% this year.

In particular, high-priced transactions between 1.2 billion KRW and 1.5 billion KRW rose from 0.54% to 0.65%, transactions between 1.5 billion KRW and 2 billion KRW increased from 0.27% to 0.32%, and transactions exceeding 2 billion KRW went up from 0.29% to 0.33% during the same period.

Ham Young-jin, head of Woori Bank’s Real Estate Research Lab, said, "The price recovery trend seen at the beginning of the year and the price increase pressure caused by high pre-sale prices of new buildings influenced the increase in the proportion of high-priced transactions in the pre-sale (move-in) rights market. However, the market still appears insufficient to briefly reproduce the hot boom that exceeded 100,000 cases in 2020."