Seoul housing prices keep rising amid downturn

The Korea Times

The Korea Times

Finance

Sat, September 30, 2023 | 18:33

Economy

Seoul housing prices keep rising amid downturn

Posted : 2019-10-24 22:01

Updated : 2019-10-24 22:01

By Jhoo Dong-chan

Seoul's housing prices are continuing their uptrend for months despite the economic downturn. The government unveiled a series of measures to keep a leash on property prices in Seoul, but experts say the task seems difficult considering the nation's saturated investment market.

According to the Korea Appraisal Board (KAB), apartment prices in Seoul climbed 0.07 percent in the second week of October from a week earlier, continuing an upward trend for 16 consecutive weeks from July.

The trend is also evident not only in Seoul but also in the nation's major cities such as Daegu, Daejeon and Gwangju.

The KAB data suggested Daegu's apartment prices climbed for five weeks in a row since the third week of September. Apartment prices in Daejeon were also up for 26 consecutive months since the fourth week of April.

Gwangju's apartment prices, which had plunged for about five months since April, also bottomed out in the second week of October.

The Ministry of Land, Infrastructure and Transport formed an intra-government taskforce with the Seoul Metropolitan Government a week ago to look into Seoul's real estate market, suspecting local real estate brokers of illegal transactions behind the current home prices hike.

The on-site inspection was the first of its kind in a year and two months since last August.

"The taskforce visited large apartment complexes in Gangnam-gu and Mapo-gu in Seoul immediately after it was formed. Some complexes there enjoyed a surge in prices over the past several weeks," a ministry official said.

The government decided to cap presale prices of privately built apartments. This is widely viewed as the strongest measure ever taken by the government to clamp down on apartment prices.

Despite a series of government measures to curb Seoul's apartment prices, experts say the current price uptrend is likely to continue for a while.

"The current uptrend in Seoul's apartment prices isn't driven by actual home seekers who want to buy and live there. It is rather led by wealthy people who look for investment sources amid the nation's low interest rate trend," said Roh Joon, a worker in NH NongHyup Bank's mortgage loan division.

"The average apartment price in Seoul has surpassed 500 million won. Most people can't afford it without a mortgage loan where the government tightened loan-to-value at 40 percent. This means a buyer should have more than 300 million won to start with."

According to Roh's analysis, average people can't afford it, and wealthy people have run out of investment options despite the Bank of Korea's rate cut last week.

"The stock market is still sluggish. The fund market is under mounting doubts since the recent derivative-linked securities scandal," he said.

Chung Hyung-geun, a local real estate agency broker, claimed Seoul's real estate market is now driven not by home seekers looking for a place to live in Seoul but by wealthy investors who want to buy their second home for investment purposes.

"Luxury apartments in Gangnam-gu, Seocho-gu and Yongsan-gu have led the current uptrend in Seoul's home prices. They are worth more than 100 million won per 3.3 square meter, but wealthy people still buy them for investment purposes," Chung said.

"These wealthy people don't even live there, but still buy these trophy apartments anyway. Gangnam-gu is the Seoul area with the largest number of empty homes. About 8 percent of apartments in Gangnam-gu are vacant, followed by Yongsan-gu with 6 percent."

jhoo@koreatimes.co.kr