Everyone's Rushing to Buy Seoul Apartments... "Prices Rose Faster and More Than Expected" [One Month After Land Use Regulation Lifted]

As of the 13th, Seoul Apartment Transactions Reach 4,766
Lifting of Toheoje Serves as Catalyst... Highest Since August
Record Prices Reported in Jamsil and Daechi Apartments Since February
Oh Sehoon: "No Abnormal Signs in Transaction Volume or Rate of Increase"
Combined Effects of Eased Loan Regulations and Interest Rate Cuts Drive Larger-than-Expected Price Surge

After the land transaction permission zones (Toheoguyeok) were lifted, the volume of apartment transactions in Seoul increased significantly over the course of a month. Demand for switching homes centered around the areas where the restrictions were lifted led to a rise in housing prices. Coupled with interest rate cuts and the easing of loan regulations, the lifting of the Toheoguyeok served as a catalyst for the rise in housing prices in Gangnam. While the Seoul Metropolitan Government describes this as a "normal situation," it has stated that if housing prices rise too much, it will consider "re-designating the Toheoguyeok." However, experts believe that due to political instability, additional regulations are unlikely, and the upward trend in housing prices is expected to continue.

According to the Seoul Real Estate Information Plaza on the 13th, the number of apartment transactions in Seoul last month was recorded at 4,766 as of that day. This is the highest since August last year (6,537 transactions). Considering that the reporting period lasts until the end of this month, the total is expected to exceed 6,000. Transactions have increased sharply since the lifting of the Toheoje system.

Price Increase Widens as Lifted Areas Set New Record Prices

Housing prices are also rising. According to the Korea Real Estate Board, as of the first week of March, apartment sale prices in Seoul rose by 0.14%, with Songpa-gu (0.68%), Seocho-gu (0.49%), and Gangnam-gu (0.52%) also increasing their weekly growth rates. The rate of price increase has been expanding weekly since the lifting of the Toheoguyeok. The ability to make gap investments without the obligation of actual residence in the lifted areas has actively attracted outside investors and switching demand.

Since the announcement on February 13th of the lifting of the Toheoguyeok in Jamsil, Samsung, Daechi, and Cheongdam, new record prices have been continuously set in these areas. On February 26th, an 84㎡ unit in Jamsil Els was traded at a record high of 3 billion KRW. On February 23rd, Daechi SK View (93㎡) was sold for 4.3 billion KRW, 500 million KRW higher than the previous record of 3.8 billion KRW. A 59㎡ unit in Jamsil Parkrio changed hands on March 1st for 2.15 billion KRW, joining the ranks of record prices. On March 8th, a 94㎡ unit in Raemian Daechi Palace was traded for 4.5 billion KRW, 120 million KRW higher than the previous record.

The price increase following the lifting of the Toheoguyeok was anticipated. However, the magnitude and speed of the rise are unusual. Experts believe that the market reflects the view that it will be difficult to introduce new regulations to curb housing prices amid political instability ahead of the early presidential election.

There are criticisms that the timing of lifting the Toheoje was not appropriate. Last year, the Seoul Metropolitan Government considered lifting the Toheoje but did not implement it, and this year’s lifting is interpreted as a political decision by Mayor Oh Se-hoon. A real estate expert who requested anonymity said, "Since last year, there have been strong requests from Gangnam-gu, and the city was considering lifting it. The fact that it was lifted only in February this year seems to reflect political timing."

Mayor Oh Se-hoon had insisted on a policy of "downward stabilization" of the real estate market until last year. Regarding the upward trend after lifting the Toheoje, he described it as a "normal situation" and said he would consider re-designation. On the 10th, Mayor Oh said, "So far, it seems that the situation has not exceeded the expected level. Looking at transaction volume, speed, and degree of increase, no significant abnormal signs have been found yet. We will monitor the situation carefully for about 3 to 6 months and decide what measures to take." The city and the Ministry of Land, Infrastructure and Transport have formed a task force to inspect the real estate market and supply situation and have threatened to respond to market disruption through on-site inspections.

"Upward Trend to Continue for the Time Being" ... "Long-term Rise Difficult" Also Voiced

Experts diagnose that the price increase after lifting the Toheoje is a result of a combination of factors such as the base interest rate cut and easing of loan regulations, and that the upward momentum is spreading to surrounding areas.

Kim In-man, director of Kim In-man Real Estate Economic Research Institute, said, "The rise over the past month has been excessive. Considering it as a slight increase is a complacent view of the Seoul Metropolitan Government," but added, "The preference for a single well-located home has strengthened due to multi-homeowner regulations, and the result was created by anxiety caused by economic recession, low growth, and supply shortage. However, the market is already ignited, and even re-designation will not easily solve the problem."

Yoon Soo-min, real estate specialist at NH Nonghyup Bank, said, "It is natural for prices to rise when regulations are lifted, but the market reacted too quickly, and prices rose mainly in the lifted areas, so the effect of lifting is gradually weakening," but analyzed, "With interest rate cuts, supply shortages, and recovery of loan regulations, the upward market is expected to last a long time."

Kim Seong-hwan, research fellow at the Construction Industry Research Institute, explained, "It would have been more reasonable to lift the restrictions when housing prices were generally on a downward trend. The upward trend is expected to continue until March or April, and prices may return to last year's levels. Whether it will continue for a longer period remains to be seen."

On the other hand, Ham Young-jin, head of the Real Estate Research Lab at Woori Bank, said, "Asking prices are still very high, and the market favors sellers, so it feels like a pause. If transaction volume is not sufficiently supported, the rise will be limited," and forecasted, "Considering political instability, possible delays in interest rate cuts, and declining growth rates, the strong to stable rise within Gangnam is expected to continue, but whether the upward trend will expand to other areas remains to be seen."