One Month After Toheoje: Muted Gangnam Market, Pre-Sales Stir on Election Hopes [AK Radio]

Cautious Sellers Withdraw Listings,
Market Adopts Wait-and-See Attitude
Pre-Sale Launches Postponed Amid Political Uncertainty,
Focus Shifts to Real Estate Market in the Second Half of the Year

The real estate market has shifted to a wait-and-see mode for a month following the expansion of land transaction permit zones (the so-called Toheoje). After a sharp surge in home prices, particularly in key areas of Seoul following the lifting of Toheoje, the market has now entered a lull. The likelihood of a downward turn in housing prices remains low. With the early presidential election now confirmed, some experts predict that this could serve as another turning point for the market, as expectations for regulatory easing in connection with the election are running high. In particular, the pre-sale market, which had postponed its schedule for the first quarter of this year, is now expected to see a surge in supply following the early election.

Apartment complexes in downtown Seoul as seen from Namsan. Photo by Yonhap News

◆ Cautious Stance Replaces Fire Sales... Muted Transactions = After the expansion of Toheoje, Seoul apartment prices continued to rise, but the rate of increase slowed. According to Real Estate R114 on April 28, nationwide apartment sale prices in the fourth week of this month rose by 0.03% compared to the previous week. In Seoul, apartment sale prices climbed by 0.14%, leading the price increase in the greater metropolitan area (0.07%). However, this was a smaller increase compared to the previous week’s 0.23%.

Transaction volume also declined. However, there were no urgent sales significant enough to trigger a drop in prices. In fact, the number of listings decreased. According to Asil, a real estate big data firm, as of April 27, the number of apartments listed for sale in Seoul was 85,963, down 6.4% from 91,768 just before the re-designation of Toheoje.

Analysts say homeowners are pulling their listings and adopting a wait-and-see approach. Ham Youngjin, head of Woori Bank’s Real Estate Research Lab, stated, “Since the expansion of Toheoje, both listings and rental properties in the affected areas have decreased,” adding, “Sellers are either withdrawing their properties from the market or holding firm on prices, driven by expectations of rising rental prices and a decrease in new supply next year.” In particular, the regulation requiring buyers to live in the property for two years under Toheoje has effectively blocked transactions for tenanted apartments, further impacting the market.

Although transactions have slowed, expectations for the presidential election are gradually rising. An industry insider commented, “Anticipation for regulatory easing due to the election is growing,” and interpreted, “Given the reduction in urgent sales and listings, the current wait-and-see stance does not appear to be a precursor to a price decline.”

◆ Pre-Sale Market to Awaken in Second Half... Election Expectations = The subdued pre-sale market is expected to see a turnaround. Construction companies have postponed many pre-sales to the second half of the year, citing political uncertainty due to the presidential election. According to KB Real Estate Data Hub and others, of the approximately 146,000 units that 25 major builders planned to pre-sell at 158 sites nationwide this year, only about 44,000 units were actually pre-sold between January and April. The remaining 100,000 units are expected to be supplied en masse from next month through the end of the year.

In Seoul, only one project-Raemian One Perla in Bangbae-dong, Seocho-gu-was pre-sold out of the planned 21,700 units during the same period. In Gyeonggi Province, which has the largest population in the country, 55,050 units were planned for this year, but only 285 units were pre-sold in the first quarter. There were no pre-sales at all in February and March. A construction company official said, “With so much political uncertainty, there was no reason to push ahead with pre-sales,” and added, “We expect a general release of pre-sale supply across the market in the second half of the year.” Construction companies are closely monitoring market changes before and after the early presidential election. As the election approaches, expectations for economic stimulus measures from the political sector are likely to grow. Ko Jongwan, head of the Korea Asset Management Research Institute, stated, “While full-scale policy announcements will come after the election, construction companies may actively launch pre-sales before and after the election to capitalize on heightened expectations.” He added, “Whenever a new administration takes office, expectations for economic stimulus rise, and signs of market revival are already appearing in the provinces.”

Reflecting this optimism, a series of brand-name apartment pre-sales are scheduled for next month. In May, planned projects in Seoul include Hillstate Mediale in Eunpyeong-gu (2,451 units), Gocheok Prugio Hillstate in Guro-gu (983 units), Godeok Gangil Daeseong Verhill in Gangdong-gu (613 units), and The Ateon in Gangdong-gu (64 units). The 1,736 general pre-sale units to be supplied next month are nearly three times the 579 general pre-sale units supplied in Seoul from January to April.

However, in some provincial or less favored areas, unsold inventory continues to accumulate. Ko Jongwan commented, “Recently, the political sector has been rolling out pledges focused on the provinces, and expectations of interest rate cuts are also rising, which could breathe new life into the real estate market.” He added, “In the provinces, expectations for economic stimulus could lead to a reduction in unsold inventory.”