Seoul’s house price rise is not unusual. As house prices in the Gangnam area, which had been quiet for a while, spread throughout Seoul, including Gangbuk, house prices are on the rise.
The Moon Jae-in government has poured out various regulatory measures, such as taxes and loans, aimed at Gangnam, the ‘barometer’ of the Seoul real estate market, but on the contrary, the ‘paradox of regulation’ in which house prices rise again as supply fails to keep up with demand, has materialized.
In particular, housing prices in Seoul have continued to rise by 0.2% for the past 6 weeks, with the ‘matching height phenomenon’ becoming evident in the mid- to low-priced apartments in the suburbs of Seoul as house prices in Gangnam rise. In addition, as the rising trend from Gangnam has spread to non-Gangnam areas such as downtown Gangbuk, there are cases of renewed reports in some complexes.
The so-called ‘Gangnam 3 districts’, such as Gangnam, Seocho, and Songpa-gu, led the increase in apartment prices in Seoul in the first half of this year. In the first half of this year alone, house prices in Seoul skyrocketed to the extent that it already exceeded the annual increase rate of last year. As the government’s regulations on high-priced and multi-homeowners were tightened, house prices surged in the Gangnam area. According to the time series data of the National Housing Price Trend Survey by the Korea Real Estate Agency, apartment prices in Seoul rose 3.18% as of the first half of this year, exceeding the annual increase rate of 3.01% last year. stood Apartment prices in Seoul have increased for four consecutive months (0.28% → 0.40% → 0.67%) starting in November last year (0.12%). After the 2/4 supply plan was announced, which included plans for the 3rd new town and urban public redevelopment, the increase slightly decreased to 0.49% in March and 0.43% in April of this year. After the April 7 by-election, expectations for the easing of reconstruction regulations are growing, and the trend continues to rise again from 0.48% in May to 0.67% in June.
As house prices in Gangnam continued to rise steadily, apartment prices in Seoul were driven up. According to the Korea Real Estate Agency, the average sale price of an apartment in the southeast region, called Gangnam 4, recorded 1.517.57 million won last month, exceeding 1.5 billion won for the first time since January 2012 when related statistics were compiled.
By classification, Seocho-gu took the first place with 1.873 billion won, up 4.20% in the first half. Gangnam-gu (1.818.8 billion won, 3.94%), Songpa-gu (1.341.98 million won, 4.52%), and Gangdong-gu (83583 million won, 3.46%) were followed.
House prices in Seoul have risen by 0.20% for six consecutive weeks since last month, rising more than 1% in two months. According to the Korea Real Estate Agency, apartment prices in Seoul rose 0.21% in the first week of September (as of the 1st), maintaining the same increase as last week.
The strong trend continued centering on reconstruction complexes in the 4 districts of Gangnam (Gangnam, Seocho, Songpa, and Gangdong), leading to an increase in house prices in Seoul. Songpa-gu (0.27%) focused mainly on popular complexes such as the reconstruction of Sincheon and Jamsil-dong, Gangnam-gu (0.26%) focused on popular complexes in Dogok and Gaepo-dong, Seocho-gu (0.25%) focused on reconstruction of Jamwon and Seocho-dong, and Gangdong-gu (0.21%) in Myeongil and Godeok-dong The increase was mainly due to the construction of major complexes such as Gil and Cheonho-dong.
In the Gangbuk area, Nowon-gu (0.27%) was mainly due to the reconstruction of Sanggye and Wolgye-dong, Yongsan-gu (0.23%) was mainly in Wonhyo-ro, Yongmun, and Ichon-dong, and Mapo-gu (0.20%) was mainly built in Singongdeok and Sinsu-dong.
An official from the Real Estate Agency explained, “The number of transactions decreased due to a shortage of properties and concerns about a further increase in the base rate, but the increase in house prices continued as reports of transactions continued in popular complexes such as Gangnam.”
Reports are being renewed one after another in all areas of Seoul, regardless of Gangnam and Gangbuk. Eunma Apartment (84㎡) in Daechi-dong, Gangnam-gu, Seoul Two deals were recorded at the all-time high of 2.62 billion won in July and August, followed by 2.25 billion won on the 11th of last month, breaking a new record. In addition, Yeomgwang Apartment in Junggye-dong, Nowon-gu (with an exclusive area of 84㎡) was traded for 980 million won on the 26th of last month, breaking the previous record price.
Given this situation, it is pointed out that various regulatory measures that the government has put out to catch house prices in Gangnam, the source of the rise in house prices, are pushing up house prices in Gangnam. The government strengthened the loan regulations for ultra-high-priced apartments through the December 16, 2019 measures. Last year, measures such as strengthening tax on multi-family dwellings were poured out with the June 17 and July 10 measures.
However, due to the government’s successive regulations, the preference for ‘a bright house’ increased mainly in the Gangnam area, and after the April 7 by-election, expectations for easing of reconstruction regulations overlapped, leading to a steep rise mainly in high-priced houses.
In addition, as house price rises continued for a long time, the ‘balloon effect’ appeared, in which the demand for home-made housing was concentrated in other areas such as Gangbuk, where it was relatively cheap, and the overall house price increase in Seoul continued. Despite various regulatory measures, the ‘regulatory uselessness theory’ is emerging as the house price rises steeply in Seoul.
Experts evaluated that the supply-demand imbalance caused by the lock-in phenomenon led to an increase in house prices in the Gangnam area, and the upward trend spread throughout Seoul.
Dae-Jung Kwon, a professor of real estate at Myongji University, said, “The government’s successive regulatory measures have increased the preference for smart houses, and with expectations for easing regulations on maintenance projects ahead of next year’s presidential election, house prices in the Gangnam area, where high-priced houses are concentrated, have skyrocketed.” As housing prices continue to rise for a long time, the demand for owning a house is concentrated in the relatively cheap suburbs of Seoul, resulting in a rise in mid- and low-priced complexes as well.”
Professor Kwon said, “As the supply-demand imbalance due to the shortage of properties continues, the increase in house prices in Seoul is being maintained. will continue,” he added.
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