By Oh Young-jin
Staff Reporter
A property bubble is being deflated not just in upscale Kangnam but also in northern parts of Seoul that have seen apartment prices soaring in recent days.
According to realtors in Nowon, the northeastern part of Seoul and Yangchon, the western region, an apartment unit of 59 square meters or 18 pyong has dropped in price for the first time this year. An apartment with the floor space of 89 square meters or 27 pyong in Yangchon also saw its price dip below 600 million won.
Across Seoul, apartment prices dipped about 0.2 percent.
These small apartments have supported average prices, despite a general drop in the Kangnam area, with their price rise registering about 3.2 percent in March alone. But for apartments with floor spaces between 69 and 99 square meters, the average price went down about 0.1 percent. The figure is small but still marked the first time the price had dropped.
Considering a price drop that has already been in progress for medium- and large-sized apartments, this is significant, realtors say. These bigger sized apartments have floor spaces between 102 and 168 square meters.
For instance, an apartment built by a private builder in Nowon with 59 square meters of floor space fetched 195 million won in August but is now going for about 10 million won less.
Realtors say that the markdown is attributed to fewer transactions than a couple months ago, also being affected by a general decline in prices for big apartments. They say that they are waiting to see whether the government's tax cut, implemented last month, will be time-delayed in its effect, although last month also saw a drop in apartment prices.
The apartment price drops are coming on top of an increasing backlog of unsold apartments, causing fears that the property bubble burst is adding to the already mounting economic woes.
According to the Hyundai Economic Research Institute, it is important to provide conditions for a soft landing in property.
``It is important to prop up prices for existing apartments but it can be even more imperative to promote the sale of unsold new apartments,'' the institute said in a report.
The report said that both financial institutions and the construction industry should coordinate within the extent of protecting households from ballooning debts.
The report obviously referred to a 10 percent mortgage rate that is weighing down on households that have bought homes at a lower rate under the adjustable system.
``At present, the backlog of unsold new apartments is set to rise but it remains to be seen whether any tax cut-propelled incentive to transactions of apartments in so-called prime ``bubble seven'' areas will have any overall effect,'' the report said.