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| Towering apartment buildings dominate this part of the Gangnam area in Southern Seoul / Yonhap |
By Lee Kyung-min
The real estate market is showing clear signs of losing steam, with Seoul apartment prices dropping for the second consecutive week amid the continued COVID-19 pandemic.
A growing number of people with multiple homes have put their properties up for sale to avoid heavier capital gains tax which is putting more downward pressure on prices in the capital city.
Data from the Korea Appraisal Board showed that as of Monday apartment prices in Seoul had dropped 0.04 percent from the week before.
This was a much faster drop than a week earlier, when they saw a decline of 0.02 percent.
The four "overheated" districts in southern Seoul ― Songpa, Seocho, Gangnam and Gangdong ― as of Monday saw a drop of 0.18 percent on average, the biggest drop in 13 months.
Three districts in northern Seoul also designated as overheated ― Mapo, Yongsan and Seongdong ― saw a drop of between 0.01 percent and 0.04 percent.
Seoul Digital University professor of real estate Lee Young-soo said prices will stay low for the time being as the impact of the current downturn is likely to continue well into the next quarter, a factor that would further suppress market demand already significantly hurt by stricter lending rules and heavier capital gains tax on multiple homeowners.
"The shock triggered by the virus will hit the real estate market. Areas outside Seoul will be hit harder than the capital region," Lee said.
However, analysts say the recent drop is an adjustment to the rapid price hike over the past few years, adding that pent-up demand will recover as soon as the virus is contained.
While some reports say an apartment worth 3 billion won ($2.4 million) in the Gangnam area fell as much as 700 million won, those are only isolated cases and are not indicative of the overall market trend, Lee stressed.
"The steep increase in apartment prices was driven chiefly by continued investor expectations that sharper gains would be possible for a sustained period following, or despite, the jump over the past few years. While the market is showing signs of a slowdown, it is not an indication of a losing streak," Lee said.
Myongji University professor of real estate Hwang Jong-kyu said that the outcome of the upcoming general election will determine how the market reacts.
"The current measures of curbing the real estate market including lending rule restrictions will certainly become stricter, in which case price hikes will slow down a bit. Vibrancy in the market will return fully no sooner than the fourth quarter," he said.
