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By Jhoo Dong-chan
There is growing interest over whether the Seoul housing market has bottomed out, with housing prices in Seoul's affluent Gangnam area showing signs of a rebound for the first time in eight months. Expectations are now high over Seoul's housing market, but experts said the prices are likely to stagnate at the current level.
The area's housing market, particularly the apartment market, has continued on a downward spiral since October due to a series of government measures aiming at curbing household borrowing, apartment prices and speculation especially in Seoul.
Recent data suggested, however, the downtrend in apartment prices in Seoul has started slowing down while the real estate confidence index has recovered since April. The Bank of Korea (BOK) also hinted at a possible rate cut in the second half of the year, increasing expectations that housing prices in Seoul will rise.
According to the Korea Appraisal Board, housing prices in Seoul's Gangnam area climbed 0.2 percent from the previous week as of June 10.
The prices jumped for the first time in 34 weeks since October. Another 10 districts in Seoul, including Nowon-gu, Mapo-gu, Guro-gu and Songpa-gu, also halted their downtrend in housing prices.
Thanks to the recovery in these districts, the decrease rate of Seoul apartment prices stood at 0.01 percent June 10, down 0.01 percentage points from the previous week's 0.02 percent. This was also the lowest drop in seven months.
BOK Governor Lee Ju-yeol, who had been hawkish about keeping the nation's key rate unchanged at the current 1.75 percent, also hinted at a possible rate cut during his speech at the central bank's event last week.
He said the BOK will "take necessary measures" since the economy displays no signs of recovery while trade talks between the United States and China have yet to see much progress.
Optimists claimed Seoul housing prices have finally bottomed out, but market insiders have said the situation hasn't improved much compared to last year.
"There were some inquiries from possible buyers, but they are still tied down with government regulations," NH NongHyup Bank mortgage loan division manager Roh Joon said.
"To them, Seoul housing prices are still too high. Nine out of 10 people need to get a loan from a bank when buying an apartment here. Last year, the government tightened loan-to-value at 40 percent. Average apartment prices are over 500 million won ($425,000) in Seoul. This means a buyer should have more than 300 million won to start with. Average people can't afford it."
The government and ruling Democratic Party of Korea (DPK) are still adamant about Seoul's housing prices.
Rep. Lee Won-wook of the DPK said last week that the government and ruling party are monitoring Seoul's housing prices closely.
"If liquidity flows into Seoul's housing market, prices could suddenly surge," Lee said.
"The government and the DPK are monitoring the situation closely. If the market shows any signs of rallying, we will come up with additional measures immediately."
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