Growing Listings in the "Gangnam 3 Districts"... Gradually Falling Asking Prices [Real Estate A to Z]

Asking Price at Jamsil Els Down 30 Million Won
"Banpo Summit" Also Drops by 10 Million Won
Impact of the Capital Gains Tax "Warning"
Prices Likely to Fall Further as May 9 Nears

In the so-called "Gangnam 3 Districts," where listings have recently been increasing, asking prices are starting to edge down. Even properties that were initially listed above the most recent transaction price, after deeply discounted units were sold off, are now seeing their asking prices reduced.

According to real estate big data firm Asil on the 9th, the asking price for a low-floor 59㎡ exclusive-use unit in "Jamsil Els" in Jamsil-dong, Songpa-gu, Seoul, fell by 20 million won from the initial listing price of 2.98 billion won to 2.96 billion won on the 6th. A day earlier, on the 5th, a high-floor 59㎡ exclusive-use unit in the same complex was also adjusted downward by 30 million won, from 3.02 billion won to 2.99 billion won. In Banpo-dong, Seocho-gu, a 59.92㎡ exclusive-use unit in "Banpo Summit" was relisted at 3.43 billion won, which is 10 million won lower than its initial listing price.

Homeowners have begun to cut asking prices even for non-fire-sale properties because the number of homes being put up for sale has recently increased. As of the 5th, there were 59,706 apartment listings in Seoul. This is about a 6.2% increase compared with the day before the president first posted a message related to multi-homeowners on social media (SNS) on January 23.

The increase has been particularly notable in the Gangnam 3 Districts and Seongdong-gu among Seoul’s autonomous districts. Listings in Songpa-gu rose 19.1% over the same period, from 3,471 to 4,137. They were followed by Seongdong-gu (17.8%), Seocho-gu (11.1%), Gwangjin-gu (10.7%), Gangnam-gu (10%), Dongjak-gu (9.5%), and Gangdong-gu (9.1%). All of these are regarded as so-called "top-tier areas" within Seoul.

The surge in listings is centered on high-priced apartments. In Garak-dong, Songpa-gu, listings for "Songpa Helio City" jumped 52%, from 512 to 778. In Jamsil-dong, "Jamsil Els" listings increased 43%, from 72 to 103. "Ricenz" in the same area also saw a 36.3% rise, from 110 to 150. In Seongdong-gu, "Trimage" listings rose 19.3%, from 62 to 74, while "Acro Seoul Forest" increased 18%, from 28 to 33. In Banpo-dong, Seocho-gu, "Banpo Summit" likewise saw listings grow 49%, from 45 to 67. Market prices in these complexes are generally above 2 billion won. Yoon Sumin, real estate specialist at NH Nonghyup Bank, analyzed, "In the end, it is a battle over property tax rather than capital gains tax," adding, "In the Gangnam area, where a perception that prices are at their peak has already formed, policy remarks coinciding with the current timing are prompting more properties to come onto the market."

Based on a simulation by Woo Byungtak, senior specialist at Shinhan Bank’s Premier Pathfinder, which assumes an increase in the comprehensive real estate tax fair market value ratio from 60% to 80% and a property tax ratio of 45%, if a unit in Seocho-gu’s Acro River Park (84.97㎡ exclusive use) is held at an actual transaction price of 5.5 billion won (with the officially assessed value estimated at about 3.3 billion won), the total annual property tax burden is estimated at 22.78 million won. This is slightly higher than under the previous calculation method (21.25 million won). For Banpo Xi (84㎡ exclusive use), the annual property tax is also expected to increase to 18.43 million won, compared with the previous estimate of 17.9 million won. Analysts say this kind of tax burden is pushing multi-homeowners in top-tier areas to decide to sell.

Although listings are increasing, transactions are not taking place immediately. Since the October 15 measures, loan regulations have been tightened, making it difficult for genuine end-users to access these areas where home prices exceed 2 billion won. Currently, the mortgage loan limit is applied differentially according to home price: up to 600 million won for homes priced at 1.5 billion won or less, 400 million won for those between 1.5 billion and 2.5 billion won, and 200 million won for those above 2.5 billion won. As a result, transactions in top-tier areas are effectively limited to wealthy buyers with ample cash on hand or those able to obtain business loans.

Because of this, some expect that asking prices will continue to fall as listings keep increasing. A licensed real estate agent in Songpa-gu explained, "Prices have not dropped sharply yet," but added, "As May 9 approaches, prices could come down further."

In contrast, listings have actually decreased in some outer areas such as Seongbuk and Gangbuk. According to Asil, listings in Seongbuk-gu fell 5.6%, while Gangbuk-gu and Geumcheon-gu saw declines of 5.3% and 2.7%, respectively. By complex, "Raemian Jangwi First High" in Seongbuk-gu saw listings drop 33.4%, from 30 to 20, and "Kkumui Sup I-Park" fell to 21 listings, down by 7. In Mia-dong, Gangbuk-gu, "Doosan We’ve Trezeum" decreased about 38%, from 45 to 28.

A quick-sale notice is posted in front of a real estate agency in Seocho-gu, Seoul. Yonhap News

These areas have many listings priced at 1.3 billion won or less and are classified as places where purchases for actual residence are feasible with the help of mortgage financing. It is analyzed that previously lease-based, non-homeowning households have switched to buying in order to ease housing insecurity, quickly absorbing available listings. A licensed real estate agent near Gangbuk-gu said, "In Gangbuk or Seongbuk, there is a lot of movement driven by genuine residential demand, so it is different from what people commonly refer to as Gangnam or Mayongseong (Mapo, Yongsan, and Seongdong-gu)," adding, "As home prices across Seoul kept rising, tenants on jeonse decided to take out more loans and move not to top-tier areas, but to Seongbuk-gu, where there are relatively new or newly built apartments."

However, some predict that the shortage of listings in outer areas will not last long. Over the longer term, the trend of keeping "one solid home" and disposing of the rest is expected to remain intact. While listings in outer areas are being temporarily absorbed as genuine demand concentrates there, homeowners who have finished calculating their property tax burden may put additional properties up for sale. A broker in the Seongbuk area said, "Until January, there were many listings for pre-sale rights in large complexes, so transactions were brisk, but now it feels like everyone who wanted to buy has already bought," adding, "Households that have failed to secure jeonse or monthly rental homes are now looking more for relatively cheap rental properties rather than purchases, so the market is effectively in a lull."

Ham Youngjin, head of the WM Consulting Center at Woori Bank, said, "Since the government is reviewing relief measures for remaining listings with jeonse tenants (homes with existing leases), there is a high possibility that more properties will come onto the market," and added, "Rather than seeing prices fall sharply, we are likely to see a continued slowdown in the pace of price increases."