Landlords Change Tune: "Bring Your Seal Now"... Confusion in Yongsan-gu Over LTPZ Designation [Report]

Shift to Buyer’s Market in a Single Day
Sellers Flooded with Inquiries to Sell
Criticism Mounts Over Hasty Regulation
Market Expected to Remain in Wait-and-See Mode for Six Months

"After a week of anxious waiting, the landlord sent their bank account number on the very day, March 19, that Seoul announced the re-designation of the Land Transaction Permission Zone (LTPZ). But the buyer said they would need a few more days to think it over." (Ichon-dong Real Estate Agency A)

On March 19, in Ichon-dong, Yongsan-gu, Seoul. Despite it being a weekday afternoon, the phone at Real Estate Agency B in Ichon-dong rang incessantly. This area is a representative affluent neighborhood in northern Seoul, home to clusters of high-priced apartments such as LG Hangang Xi and Raemian Chelitus along the Han River.

After the manager of Agency B finished a call that lasted several minutes, the phone rang again. He showed signs of exhaustion, saying, "We are flooded with inquiries from people asking if they should sell their homes." The manager of Agency A added, "Gap investors are unsettled by the news of the LTPZ designation," and noted, "Many clients have come in, expressing serious concerns about the future of the market."

Shift to Buyer’s Market... Gap Investors Growing Anxious

The real estate market in Yongsan-gu, where high-end apartments are concentrated, has been greatly unsettled by the inconsistent policies of Seoul City and the central government.

The previous day, Seoul City announced plans to expand the LTPZ to cover all apartments in the three Gangnam districts (Gangnam, Seocho, Songpa) as well as Yongsan-gu. This comes just over a month after restrictions were lifted in the so-called "Jam-Sam-Dae-Cheong" (Jamsil, Samsung, Daechi, Cheongdam) area on February 12, only to be reimposed. As the rise in home prices centered on Gangnam spread throughout Seoul, Yongsan-gu was also included in the areas requiring transaction approval.

LG Hangang Xi Apartment located in Ichon-dong, Yongsan-gu, Seoul. Photo by Lee Ji-eun

Homeowners in this area were thrown into confusion. Those who had been negotiating with potential buyers abruptly changed their stance, saying, "Bring your seal right away." However, from the buyers' perspective, it has become difficult to proceed with transactions, as they need to observe how prices move following the lifting of restrictions.

The manager of Real Estate Agency B in Ichon-dong said, "Sellers looking to upgrade are in a hurry to sell their homes," and added, "We keep getting calls from homeowners asking how they can sell their properties quickly." The manager of Real Estate Agency C in Ichon-dong commented, "The transaction terms, which had been negotiated mainly in favor of sellers, suddenly evaporated overnight," and lamented, "Now that buyers have shifted to a wait-and-see approach, sellers are feeling increasingly anxious."

Gap investors have rushed to close deals quickly. In order to purchase a home with a jeonse (long-term lease) tenant, contracts must be signed before March 24, when the expanded LTPZ takes effect. The manager of Agency A said, "Through the real estate agents' information networks, I received multiple messages saying that existing listings at high asking prices were traded on March 19," and speculated, "I suspect these buyers were gap investors."

"Let's Wait Six Months... It's Unlikely Prices Will Drop"

However, it appears this confusion will not last long. There is a prevailing belief that lifting the LTPZ leads to price increases, so both sellers and buyers are expected to pause transactions and adopt a wait-and-see stance for the time being. The manager of Agency C predicted, "Everyone knows that lifting the LTPZ causes home prices to jump," and added, "With the restrictions set to be lifted in just six months, I expect most people will see this as a brief pause and simply watch the market."

Hangaram Apartment located in Ichon-dong, Yongsan-gu, Seoul. Photo by Lee Jieun

There is also criticism that the government acted hastily in imposing regulations before the overheating trend had fully spread to Yongsan-gu. According to Zigbang, the total number of apartment transactions in Yongsan-gu last month was 102, with only 23% (23 transactions) setting new record-high prices. In contrast, in Seocho-gu during the same period, 44% (102 out of 234 transactions) were at record-high prices. The manager of Agency D commented, "In Ichon-dong, transactions only started to become active after the Lunar New Year. It is hard to say that prices have surged excessively compared to the three Gangnam districts," and added, "It feels as though the area has been caught in the crossfire of a battle between giants."

There is also analysis that designating LTPZs as a means to stabilize prices has its limitations. Song Seung-hyun, CEO of Urban and Economy, said, "In Gangnam, Seocho, Songpa, and Yongsan-gu, apartment purchases now require approval from local governments, so speculative transactions are likely to decrease sharply. In the short term, transaction volumes are expected to fall." However, he also explained, "Apartments in Seoul's core areas are highly scarce, so sellers are unlikely to lower prices easily, meaning the potential for long-term price declines is limited."