Transaction Slowdown Spreads Beyond Gangnam as Yongsan and Mapo See 32% Drop

 
The slowdown in apartment transactions that began in the Gangnam area is now affecting major regions along the Han River, including Yongsan and Mapo. In the past month, transactions in these two areas have dropped by nearly 32%, with Yongsan experiencing a more than 60% decrease in transactions exceeding 3 billion won. Some high-end properties are now listed at prices lower than their previous peak transaction values. Meanwhile, areas in outer Seoul and southern Gyeonggi continue to see price increases, suggesting a divergence in market trends based on region and price range.

According to the Ministry of Land, Infrastructure and Transport's real transaction disclosure system, the total number of apartment sales in Yongsan and Mapo in August was 151, down 31.7% from 221 in July. Yongsan saw a drop from 71 transactions to 38, a decrease of 46.5%, while Mapo's transactions fell from 150 to 113, a 24.7% decline. However, the number of reported transactions for August may increase as the reporting deadline has not yet passed.

Despite the decline in transactions, the price indices for both regions continue to rise. According to the Korea Real Estate Agency, apartment prices in Yongsan and Mapo increased by 0.02% and 0.06%, respectively, last week. Although the rate of increase has slowed, it has not turned negative. In the same week, Jung-gu saw a 0.07% increase, Yangcheon-gu 0.10%, and Dongjak-gu 0.11%. This indicates that while the price indices are still rising, actual transactions are declining.
 
In Yongsan, the higher the price, the greater the decline in transactions. Sales under 1.5 billion won fell from 17 in July to 11 in August, a decrease of 35.3%. Transactions between 1.5 billion and 3 billion won dropped from 36 to 20, a 44.4% decline. Transactions exceeding 3 billion won plummeted from 18 to 7, a staggering 61.1% drop.

Real estate agents on the ground are also feeling the impact of the slowdown in high-end housing transactions. A real estate agent in Ichon-dong, Yongsan, noted, “In the past month or two, inquiries from buyers have significantly decreased, and listings are gradually increasing. There are some transactions in the 2.2 to 2.3 billion won range for 25-pyeong units and around 2.8 billion won for 33-pyeong units, but there are almost no transactions in the 4 to 5 billion won range.”

In Mapo, transactions under 1.5 billion won fell from 83 to 58, a 30.1% decrease, while those between 1.5 billion and 3 billion won dropped from 66 to 55, a 16.7% decline. There were no transactions over 3 billion won in August, down from one in July. Unlike Yongsan, where the decline in high-end transactions is pronounced, Mapo is also seeing a slowdown in the majority of transactions under 3 billion won.

Some high-end properties are now listed at prices lower than their previous peak transaction values. For instance, the Raemian Chelli Tuss in Yongsan was sold for a record 5.59 billion won in July, but is now listed at around 4.7 billion won. Similarly, the Raemian Prugio in Mapo, which sold for 2.65 billion won in June, now has a minimum asking price of around 2.49 billion won.

However, it is important to note that the highest transaction prices and the lowest asking prices can vary based on individual conditions such as floor and direction, making direct comparisons challenging. The actual prices at which transactions occur will likely be a key factor in determining future price adjustments.

Market analysts believe that the price adjustments and transaction slowdowns observed in the Gangnam area since the government's tax reform announcement in August are now impacting other high-end regions as well. With rising interest rates, lending restrictions, and the burden of rapid price increases, buyers are adopting a wait-and-see approach, anticipating further price adjustments.

Shin Bo-yeon, a professor at Sejong University’s Department of Real Estate AI Convergence, stated, “In Gangnam and Seocho, the announcement of the tax reform has strengthened sellers' willingness to sell, leading to an increase in listings, while buyers are waiting for additional adjustments, resulting in a significant drop in transactions. This trend is likely to continue in high-end areas until the tax reform is finalized.”
 
The price adjustments in high-end apartments are also reflected in monthly statistics. According to KB Real Estate's 'September National Housing Price Trends,' the KB Leading Apartment 50 index, which tracks price changes of the top 50 apartments by market capitalization, fell by 0.22% from the previous month, marking a downturn for the first time in four months. The same survey indicated that apartment prices in Gangnam also dropped by 0.30%, indicating a shift to negative growth.

Expectations for price increases have also diminished. The Seoul apartment price outlook index fell to 116.4, down 1.4 points from the previous month, marking a three-month consecutive decline. The 11 districts south of the Han River recorded a score of 108.9, down 2.4 points in a month, which is a larger drop compared to the 14 districts north of the Han River (124.8, down 0.3 points). However, both regions remain above the baseline of 100, indicating that expectations for price increases still prevail.

In contrast, areas in outer Seoul and southern Gyeonggi continue to see price increases. According to KB's survey, apartment prices in Nowon-gu rose by 2.32% from the previous month. Other districts such as Jungnang-gu (2.20%), Dobong-gu (1.95%), Seongbuk-gu (1.93%), and Gangbuk-gu (1.90%) also exceeded the average increase of 1.13% in Seoul. In Gyeonggi, notable increases were seen in Suwon's Yeongtong-gu (4.30%), Anyang's Dongan-gu (2.75%), Gwangmyeong (2.73%), and Hwaseong's Byeongjeom-gu (2.71%).

Experts interpret that while demand for high-end housing is waning due to tax and lending regulations, the outer areas are supported by demand from buyers unable to enter higher-priced markets and by increased demand for purchasing due to rising rental prices.

Professor Shin noted, “If the tax reform is confirmed as currently proposed, we may see an increase in listings from sellers looking to realize profits, and the burden of property taxes will also increase, leading to further adjustments in the high-end market. Meanwhile, mid- to low-priced areas are seeing demand shift from buyers who are unable to enter higher-priced markets, and rising rental prices are pushing up sales.”

However, mid- to low-priced areas may also face challenges if home prices rise, as buyers could encounter limits on loans and personal funds. This could lead to a shift in demand to relatively cheaper areas.

There remains demand for entry into Seoul, and ongoing shortages in rental listings, along with a trend toward renting and a decrease in new apartment supply, suggest that it is premature to conclude that the slowdown in high-end housing transactions indicates a broader downward trend in Seoul's housing market.

Ham Young-jin, head of the real estate research lab at Woori Bank, stated, “If the structural supply shortage in the rental market is not resolved, it could continue to support buyer demand in outer Seoul and southeastern Gyeonggi. Even if these areas maintain an upward trend this year, transactions may remain subdued.”

He added, “While liquidity remains high, the burden of rising interest rates, household debt, and lending regulations make it difficult to sustain significant price increases. Whether rental prices stabilize and whether the market truly feels the effects of increased supply will be crucial factors for the market moving forward.”