Property market showing recovery signs

By Yoon Ja-young

The government raised the official appraisal prices of apartments by 3.1 percent this year, reflecting the recovery in the housing market.

The housing market continued to recover in the first quarter of the year. Lower mortgage rates, an improvement in investor sentiment and the passage of bills aimed at boosting the real estate market are helping the recovery, a state-run think tank said.

The Ministry of Land, Infrastructure and Transport announced the official appraisal prices of 11.6 million apartments around the country, Wednesday. The official appraisal price is used for taxation.

The official price rose by 3.1 percent this year. While it rose by only 2.5 percent in Seoul, Gyeonggi Province and Incheon, other regions led the rise. Daegu saw the price rise by 12 percent and Jeju by 9.4 percent.

Also notable was a hike in the prices of small apartments rather than big ones. While small apartments with less than 85 square meters in area saw between a 2.8 to 4 percent rise in prices, those bigger than 85 square meter saw prices rise by between 1.4 and 2.8 percent.

“This seems to be due to changes in demographics and the increase of people living alone,” a spokesperson for the land ministry said.

The most expensive apartment in the country was Traum House in Seocho-dong, southern Seoul, which was appraised as 6.1 billion won.

Each of the country’s 251 local governments also announced official appraisal prices of general single houses. It showed that the residence of Samsung Group Chairman Lee Kun-hee in Hannam-dong, downtown Seoul, is the most expensive house in the country. Its official appraisal value is 15.6 billion won.

The Korea Development Institute (KDI) said that housing transactions totaled 270,053 in the first quarter this year, up 18.3 percent from the previous year ― and the largest number since 2006.

Transactions in Seoul and Gyeonggi Province increased by 22.5 percent and expanded 17.6 percent in other areas.

Housing prices rose 2.3 percent from a year ago, continuing the pickup. The rise was steeper in non capital areas, marking 3.9 percent, while Seoul and Gyeonggi Province saw housing prices increase by 1.7 percent.

In a survey of real estate market experts by the KDI, 50.7 percent said the low interest rate helped pull up housing prices. One out of five cited improving investor sentiment as the cause of the recovery, while 19.1 percent attributed it to the lack of supply in the market.

While the sale of new apartments is expected to increase by 187.7 percent in Seoul in the second quarter compared with last year, new apartments where construction is complete for buyers to move in will decrease by 51.2 percent. In Korea, construction companies often sell apartments before they start building them. The buyers therefore must wait a couple of years to move into the apartments after they are completely built.

As it means less new homes available for tenants as well, the KDI expected it may pull the rent higher.

“Due to the decreasing supply of homes for jeonse and falling interest rates, jeonse is likely to continue to rise for time being,” the institute said in its report.

Jeonse is Korea’s unique property rental system where the tenant pays the landlord a lump sum deposit, which the landlord fully gives back to the tenant at the end of the contract. Jeonse prices have been soaring during the past few years as more homeowners switched to monthly rent.

Housing mortgages totaled 465.8 trillion won as of February, up 3.8 trillion won from the previous month.