[Jiptok] The 'Smart Single Home' Trend Fuels Housing Price Polarization

Rising Taxes Lead to Avoidance of Multiple Home Ownership
Strong Preference for Gangnam Apartments
Seoul Apartment Supply Shortage Also a Cause

#An 84㎡ unit in Banpo Xi, Seocho-gu, Seoul was traded for 3.48 billion KRW on the 10th of last month. This price is 250 million KRW higher than a year ago (3.25 billion KRW). Centras in Seongdong-gu, Seoul also rose by nearly 200 million KRW in one year. An 84㎡ unit was traded for 1.8 billion KRW on the 25th of last month. Looking at the transaction records from the same month last year, the price was around 1.625 billion KRW. The price recovery slows down as you move north in Seoul. Raemian Gireum Centerpiece (84㎡) in Seongbuk-gu, Seoul was traded for 1.458 billion KRW in April, which is just over 100 million KRW higher than a year ago (1.315 billion KRW). (Based on data from the real estate big data company ‘Asil’)

#House prices in the metropolitan area are on a downward trend. The transaction price of an 84㎡ unit in Songdo SK View, Incheon last month was 734 million KRW, down 16 million KRW from a year ago (750 million KRW in June last year). Looking at the rate of change in housing sale prices by region (cumulative from January to April 2023 compared to the same period in 2024), the decline in house prices outside Seoul is more evident. While the metropolitan area (-0.44%), provincial metropolitan cities (-0.90%), and 8 provinces (-0.19%) all showed negative growth, only Seoul (0.02%) showed an increase.

Recently, only Seoul’s house prices have surged, making the polarization between Seoul and non-Seoul housing markets more pronounced. Analysts say this polarization is highlighted by the preference for a ‘smart single home’ apartment in Gangnam and the forecasted shortage of apartment supply in Seoul.

‘Smart Single Home’ Divides the Real Estate Market

Kim Hyoseon, Senior Real Estate Advisor at NH Nonghyup Bank, pointed out the polarization of house prices on the 3rd based on data from the Korea Real Estate Board. He analyzed, "During the Moon Jae-in administration, comprehensive real estate tax, capital gains tax, and acquisition tax were all raised, which made people reluctant to become multi-homeowners, starting the polarization."

He continued, "More people chose the path of owning a ‘smart single home’ in Gangnam, and demand for Gangnam apartments increased intensively." As various taxes soared, rather than becoming multi-homeowners, demand grew for purchasing a proper single home in areas where prices would not fall, intensifying the polarization of house prices.

Senior Advisor Kim added, "In the past, when consulting investors living in provinces, they were reluctant to buy apartments in Seoul, but from 2018 and 2019, inquiries started coming in asking ‘Which area in Seoul should I buy?’ Nowadays, even people from provinces are mostly curious about Seoul real estate, increasing demand for Gangnam apartments."

As he said, looking at the cumulative rate of change in sale prices from January to April this year (compared to the same period last year), the Gangnam 3 districts (Gangnam 0.17%, Seocho 0.14%, Songpa 0.30%) and Ma-Yong-Seong (Mapo 0.34%, Yongsan 0.59%, Seongdong 0.54%) rose noticeably. Meanwhile, No-Do-Gang (Nowon -0.55%, Dobong 0.61%, Gangbuk -0.19%) and Geum-Gwan-Gu (Geumcheon -0.23%, Gwanak -0.28%, Guro -0.29%) declined.

"Fewer Houses to Buy" Triggers Anxiety

More than half of the jeonse prices for Seoul's 'standard apartment size' lease contracts this year have exceeded 600 million won. On the 5th, a real estate office in Seoul displayed jeonse and sale price lists. Photo by Kang Jin-hyung aymsdream@

Recent concerns about supply shortages are further stimulating Seoul’s house prices. The number of housing permits, a leading indicator of the real estate market (May housing statistics), was 23,492 units, down 15.9% from April. From the beginning of this year to May, 125,974 units were permitted, a 24.1% decrease compared to the same period last year. Housing starts in May were 17,340 units, shrinking 60.4% from the previous month. Typically, housing supply (move-in) begins 3-5 years after permits and 2-3 years after starts.

Senior Advisor Kim said, "As reconstruction and redevelopment in Seoul become more difficult, forecasts predict a significant drop in move-in volumes in Seoul starting next year. Within Seoul, the scarcity of new apartments in good locations is highlighted, pushing sale prices up."

This concentrated rise in house prices is spreading to surrounding areas, but the level is incomparable to Seoul. Senior Advisor Kim added, "Older apartments are mainly traded as low-priced listings, and as urgent sales are exhausted, prices of apartments outside No-Do-Gang started to turn upward in May, but the level is still minimal."

On the other hand, in provinces losing demand to Seoul, house prices are falling and unsold units are rapidly increasing. He said, "Regions like Daegu, Gyeongbuk, and Busan, which had significant past price increases and oversupply, are currently experiencing large declines and prolonged downtrends." Unsold apartments are also concentrated in provinces. According to the Ministry of Land, Infrastructure and Transport’s report on regions with increasing unsold apartments (as of April), Incheon (1,591 units), Busan (1,344 units), Gyeonggi (1,119 units), and Gyeongnam (874 units) ranked highest.

Kim Taehwan, head of the real estate team at KB Management Research Institute, said, "Last month, the nationwide housing sale price outlook index was 93.3, indicating a prevailing expectation of decline, but only Seoul exceeded 100, switching to an ‘upward outlook’ for the first time in eight months since September last year. Looking at the rate of change in housing sale transaction volumes by region (April compared to the previous month), Seoul’s 30% is overwhelmingly higher than other regions."

However, there is a forecast that the upward trend in sales prices in Gangnam, Seoul, will not continue indefinitely. Senior Advisor Kim said, "Currently, demand caused by supply shortages is being pulled forward, and since demand is limited, it will be difficult for Seoul apartment prices to keep rising. To stabilize sale prices and resolve polarization, solving the supply shortage in Seoul is an urgent task."