Seoul apartment prices ready for a fall

Latest data point to mid- or long-term downturn in investor sentiment

Dongdaemun Gate in Seoul, South Korea. Noomna nakhonphanom/Shutterstock

Apartment prices in Seoul rose to an all-time peak in the first six months of 2018, indicating a market headed for consolidation, reported The Korea Herald.

Unit prices in the southern and central parts of the South Korean capital have skyrocketed to anywhere from KRW500 million to KRW1 billion, a new high since 2016. In Gangnam, apartments have reportedly traded at KRW80 to 90 million per pyeong (3.3 square metres).

Yet investor sentiment has been on the wane since the third quarter of 2018 in anticipation of taxation measures on owners of multiple homes and costly apartments, noted property consultant Park Sang-eon.

The monthly trading volume of apartments in Seoul hit 3,586 cases in November, a nearly 60 percent decline from the 10,184 cases recorded in October and the lowest since August 2013.

“The figure for last November similar to that of five years ago indicates a mid or long-term downturn in sentiment and prices,” a property agent told the Herald.

The southern Seoul area led the decreases, with apartment prices in Gangnam, Seocho, Songpa and Gangdong-gu registering a collective weekly drop of 0.14 percent in the last week of November, data from the Korea Appraisal Board showed.

Investor sentiment has soured since announcements that the comprehensive property tax will be raised early next year. The benchmark rate hike of 25 basis points from November has also been weighing on sentiment.

“It is true that the government failed to push for powerful measures — like levying heavy taxes in proportion to housing prices — in the critical early stage,” said one real estate agent in Gyeonggi Province. “Though it is late, policymakers appear to be changing their stance to hawkish.”