Gangnam Home Prices Hit Record Highs, but Gains Slow After LTPZ Expansion

Songpa District Turns to a 0.03% Decline
Listings Down 17% from Ten Days Ago
Record-High Transactions in Gangnam 3 Districts Before Policy
"Prices of Large-Scale New Complexes in Popular Areas to Hold"

Following the expansion of Seoul's Land Transaction Permission Zones (LTPZ), the number of listings in key areas has declined and the rate of price increases has slowed. This contrasts with the surge in record-high transactions that had been occurring in Seoul’s Gangnam 3 Districts and Yongsan District prior to the policy’s reimplementation. Experts, however, view this as a temporary phenomenon and predict that the re-designation will not lead to a sustained downward trend.

According to the Korea Real Estate Board on March 28, apartment sale prices in Seoul for the fourth week of March (as of the 24th) rose by 0.11% from the previous week, reflecting increased demand for quick sales and a wait-and-see attitude, but the rate of increase slowed. Gangnam District (0.36%) and Seocho District (0.28%) also saw slight increases. However, Songpa District, which had been identified as the epicenter of price hikes following the lifting of the LTPZ, shifted to a decline, recording -0.03%. In Seongdong District (0.35%) and Mapo District (0.21%), which had been expected to experience a spillover effect, the rate of increase slightly decreased compared to the previous week (Seongdong 0.37%, Mapo 0.29%), but the upward trend continued.

Along with the slowdown in price increases, the number of listings also fell. According to Asil, Songpa and Seocho Districts saw listings decrease by more than 10% compared to ten days earlier. As of the 27th, the number of listings in Songpa District fell by 17.3%, from 6,767 to 5,601. Seocho District saw a 12.4% decrease, from 7,552 to 6,616. Yongsan District’s listings dropped by 9.1%, from 1,954 to 1,778, and Gangnam District’s listings decreased by 8.8%, from 8,645 to 7,801.

This contrasts with the situation just before the reimplementation of the LTPZ, when record-high prices were being set. According to the Ministry of Land, Infrastructure and Transport’s actual transaction price system, a 84-square-meter unit in Hillstate 1st Complex in Samseong-dong, Gangnam District, was sold for 3.19 billion won on March 22, three days after the announcement of the LTPZ expansion. This was 90 million won higher than the previous record. A 59-square-meter unit in Yeoksam Prugio changed hands for 2.48 billion won, up 130 million won from the previous price. On the day of the announcement, a 49.4-square-meter unit in DH Honor Hills in Gaepo-dong was contracted at 1.95 billion won, 130 million won above the previous record.

In Ichon-dong, Yongsan District, a 101.9-square-meter unit in Hangang Mansion was sold for 4.3894 billion won on March 23, the day before the LTPZ was implemented, marking a 39.4 million won increase from the previous transaction. In Banpo-dong, Seocho District, an 84-square-meter unit in One Bailey was sold for 7 billion won on March 3, setting a record of 2 billion won per 3.3 square meters. In online communities, there are also reports of units of the same size trading at 7.2 billion won.

Analysts say that the expansion of the LTPZ is changing the market atmosphere. However, experts believe that while transaction volumes may decrease due to the expansion, prices in highly sought-after areas such as large-scale new apartment complexes are unlikely to decline.

Kim Jaekyung, head of Toomee Real Estate Consulting, explained, "The designation of LTPZs may temporarily suppress prices, but it has been proven ineffective in the mid- to long-term. Even after the expansion, there are still not many listings in Banpo and Apgujeong. Some buyers, who had been waiting for listings to accumulate, are now feeling pressured as prices have not dropped. The fundamental causes have not been resolved while supply has decreased."

Kim Hyosun, Chief Real Estate Specialist at NH Nonghyup Bank, analyzed, "During the LTPZ designation period, transactions are inevitably centered on actual demand, so I expect prices to stabilize going forward. In areas where record-high prices are being set, there is little incentive to lower asking prices for the next six months, making it likely that transactions will stall. Prices in popular areas with large-scale new complexes will likely be maintained, but in less popular areas, transactions may occur at reduced prices."

Meanwhile, the Seoul Metropolitan Government has been conducting on-site inspections daily to crack down on speculative transactions. Authorities are focusing on real estate agencies in areas with suspicious transaction records and are also reviewing funding contracts and other related documents.