[Home Tech] Will House Prices Rise Due to the Lifting of Toheje?

The Rise in Southeastern Seoul Grows Larger
But the Real Drivers Are Apartments Along the Han River
Regulation Lifting Had an Impact, But It's Not the Only Reason

Editor's NoteMore than 70% of the assets of Korean citizens are tied up in real estate. A home is our most important asset and the closest, coziest place to us. While living tied to our homes, we provide the necessary information for buying and selling houses. Asia Economy publishes [JipTech] every three weeks with Kim Hyo-seon, Senior Real Estate Specialist at NH Nonghyup Bank, to fill you in with the essential knowledge.

Recently, the apartment prices in the southeastern area of Seoul have shown an unusual upward trend. According to the Korea Real Estate Board's 'Weekly Apartment Price Trends Nationwide,' this area has not experienced a single week of price decline since March last year, despite the economic recession and real estate market downturn. The cumulative increase rate this year reached 1.89%. This contrasts with the provincial areas, which have been on a downward trend since November 20, 2021.

Notably, the turning point toward a full-fledged upward trend this year came after the Seoul Metropolitan Government announced the lifting of the land transaction permission zones (Toheoguyeok). From the third week of February, immediately following the lifting on the 12th of last month, the weekly house price increase rate in southeastern Seoul exceeded 0.2?0.7%. Earlier this year, this figure had remained in a slight decline range of 0.01?0.06%.

The city lifted the land transaction permission zones for 291 apartments in the International Exchange Complex District (Daechi, Cheongdam, and Samseong-dong in Gangnam-gu; Jamsil-dong in Songpa-gu) and six areas where the establishment of associations was approved among the candidates for New Town Planning and Public Redevelopment. However, some complexes with high expectations for reconstruction maintained regulations due to concerns over speculative overheating.

The upward trend in house prices in the southeastern area continues. With the increase accelerating, from the 17th of last month to the 10th of this month, Songpa rose by 2.34%, Gangnam by 1.86%, and Seocho by 1.54%. During the same period, the nationwide housing market still maintained a downward trend.

Transaction volume, considered a leading indicator of price changes, also increased by about 1.3 times year-on-year in the southeastern area after the regulation was lifted. Gangnam-gu, which had the largest area lifted, increased by about 1.5 times, while Songpa-gu increased by 0.4 times. This is believed to be due to the lifting of regulations requiring at least two years of actual residence after purchase, which made transactions of listings freer.

The change in transaction volume directly affected actual transaction prices. During the same period, the average actual transaction price in Gangnam-gu rose by 119.5%, Songpa-gu by 114.6%, but Seocho-gu fell to 86.1%. This phenomenon appears to be the result of active transactions and price increases as listings from areas long bound by regulations came onto the market and aligned with already high surrounding market prices.

This price increase trend seems to have been triggered by the lifting of the land transaction permission zones. However, when examining the areas leading the actual price increases, it is found that they are not the regions where the zones were lifted. Rather, it is noteworthy that the prices of apartments along the Han River rose significantly. Apartments along the Han River in Banpo-dong recorded an overwhelming increase rate of about 137% year-on-year. Apgujeong-dong also showed an increase of about 126?133%. While the lifting of regulations influenced buyer sentiment, the places where prices rose the most were rare apartments with premium locations along the Han River. It can also be said that a solid demand base for apartments in this area is driving up prices.

In particular, the Gangnam 3 districts have many buyers with a high proportion of cash holdings, making them less affected by financial regulations. It is difficult for other regions to rapidly surge to follow the Gangnam 3 districts simply by lifting regulations. Therefore, there is no need to focus excessively on the land transaction permission system. Rather, it is time to put more effort into preparing effective measures to resolve the regional supply-demand imbalances and the resulting temperature differences that have continuously appeared since last year.

Kim Hyo-seon, Senior Real Estate Specialist, NH Nonghyup Bank