[Why&Next] The Era of 'Eoljuksin'... New Apartment Transactions in Seoul Decrease Further

New Apartment Transaction Share 25.6%→21.4%
Gangnam 3 Districts 20.2%→20.0%
Mayongseong 28.5%→23.3%

"Transactions Expected to Decrease as New Construction Prices Rise Further"

The keyword that defines this year's real estate market is "Eoljuksin (new apartments no matter how frozen to death)," but the actual transaction ratio of new apartments was found to be lower than in previous years. As prices rose due to the preference for new apartments, the transaction ratio of new apartments gradually decreased. This trend was particularly noticeable in the 'Gangnam 3 districts (Gangnam, Seocho, Songpa districts)' and 'Mayongseong (Mapo, Yongsan, Seongdong districts),' which led the price increase in the Seoul real estate market.

Experts expect the 'Eoljuksin' trend to continue next year as well. However, they also predict that the decrease in transaction volume due to rising prices will persist. Those who want to live in new homes will have to switch to older homes according to their financial situation. However, considering the recent increase in construction costs, which has raised the time and expenses required for rebuilding older homes, it is likely that demand will remain waiting for new apartment move-ins.

Seoul Walking Column - A residential complex in downtown Seoul where apartments and houses coexist. Photo by Jo Yongjun jun21@

New Apartment Transaction Ratio: 25.6% Last Year → 21.4% This Year

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system as of the 29th, among the 47,115 apartment transactions in Seoul this year, the transaction ratio of new and semi-new apartments was 21.4% (10,060 cases). This is a decrease compared to the same period last year (25.6%). New complexes refer to those built within the last 5 years. This year, apartments completed from 2020 to this year fall under this category. Semi-new complexes are those built between 6 to 10 years ago.

The decrease in the transaction ratio of new apartments was prominent in major price-increasing areas this year, such as the Gangnam 3 districts and Mayongseong. In the same period last year, the transaction ratio of new and semi-new apartments in the Gangnam 3 districts changed from 20.2% (transaction volume: 6,040 cases) to 20.0% (8,786 cases). Mayongseong decreased from 28.5% (transaction volume: 3,229 cases) to 23.3% (5,543 cases). Looking only at new complexes, the Gangnam 3 districts shrank from 7.7% to 7.1%, and Mayongseong decreased from 10.2% to 5.2%.

Especially, the number of transactions for new homes decreased further from the first half to the second half of this year. Among the 27,286 apartment transactions in Seoul in the first half of this year, the transaction ratio of new and semi-new complexes was 22.7%, but in the second half of this year, as of the 29th, it dropped to 19.5% (total transaction volume: 19,829 cases). The Gangnam 3 districts (21.0% → 18.6%) and Mayongseong (25.4% → 20.0%) led this trend.

There is an analysis that transactions are not occurring because the prices of new apartments have risen too much. Kim Je-kyung, head of Tumi Real Estate Consulting, said, "Due to the preference for new apartments, prices of new apartments have risen tremendously," adding, "New homes are popular, but because they are expensive, the transaction ratio has rather decreased." He continued, "Even in Mapo-gu, new complexes surpassed 2.1 billion KRW, setting a new high, but some older complexes in the area have not recovered their previous peak prices."

According to the Korea Real Estate Board, the newer the house, the greater the price increase. The sales price index for complexes in Seoul that are 5 years old or less was 101.44 last month, up 7.44% from 94.00 in September last year. Complexes with a mid-range age of over 10 years and up to 15 years increased by 5.71% (from 96.36 to 102.07) during the same period, and those over 20 years old rose only 3.29% (from 93.22 to 96.51).

Experts Predict "New Apartment Transaction Ratio Will Fall Further"

Experts foresee that the transaction ratio of new apartments will decline further. Kwon Young-sun, team leader of the Real Estate Investment Advisory Center at Shinhan Bank, said, "Demand for new apartments continues to increase, pushing up asking prices, but due to high prices, it will remain difficult for transactions to be completed." He added, "Currently, loan regulations under the second phase of the stress Debt Service Ratio (DSR) are in effect, and despite cuts in the base interest rate, market interest rates have not fallen. The third phase of stress DSR is scheduled to be introduced next year, and even if the base rate is lowered further, it is uncertain whether loan interest rates will immediately decrease, so transactions of new apartments will be further constrained."

On the other hand, the price increase trend for new apartments is expected to continue. Kim said, "With the era of 500 million KRW reconstruction contributions, prices of new apartments will rise further." He explained, "Buyers prefer to purchase a 2 billion KRW new apartment rather than buying a 1.5 billion KRW older complex and paying 500 million KRW in reconstruction fees." He added, "Regardless of the overall market transaction volume, new apartments are setting new record prices, so prices will continue to rise."

Kim Hyo-sun, senior real estate specialist at NH Nonghyup Bank, also explained, "The scarcity of new complexes is increasing day by day," adding, "Reconstruction has become difficult, and concerns about a supply cliff for new housing are significant, so demand for new apartments will grow." She also said, "The price gap between new and older complexes will widen further, and since new homes are expected to be priced higher than other complexes, the proportion of new complex purchases will decrease."