Apartment sales down, prices fall

A 58-year-old man who lives in an 85-square-meter apartment in the Ricenz Condominium Tower in Jamsil, southeastern Seoul, is having trouble sleeping nowadays. He put his apartment up for sale, but because of higher property taxes, he’s had no takers.

The value of apartment, which was about 1.85 billion won in September, has fallen by about 300 million won since then.

“I have listed it for 1.6 billion won, but nobody is interested,” said the apartment owner, who only wished to be identified as Kim. “It seems all buying interest has dried up since the government real estate regulation was announced on Sept. 13.”

He said his real estate agent has proposed further lowering the asking price to 1.4 billion won.

“It’s not just Jamsil,” said Kim Se-bin, who runs a real estate agency in Jamsil. “The same thing is happening in all three Gangnam districts - Songpa, Gangnam and Seocho.”

The real estate market has frozen.

According to the Ministry of Land, Infrastructure and Transport, real estate transactions totaled 56,000 in December, down 22.3 percent compared to the same period a year ago.

When compared to the average monthly transaction level of 86,000 in Decembers over the past five years, last month’s figure is 35.6 percent lower.

Seoul-only numbers are far worse.

The situation for apartments scheduled for redevelopment in the Gangnam area is particularly bad, with demand almost non-existent. These apartments were in great demand last year and in part responsible for the heating up of the market.

In December, only 7,000 apartments were sold in Seoul, about half the 13,740 units sold in the same month in 2017.

Since the government tightened the regulation on real estate, only five units changed hands at the Trizium Apartment, which is right across from the Ricenz.

Last month an 84-square-meter apartment was listed at 1.52 billion won. Today, it is listed at 1.4 billion won and interest is weak.

“The buyers are waiting for the price to fall further, while those struggling to find buyers are lowering prices,” said Kim Jong-uk, a realtor in the neighborhood. “The 20 or so real estate agencies in the neighborhood are virtually closed.”

According to the Korea Appraisal Board, apartment prices as of Jan. 14 were down on average 0.07 percent compared to the previous week. Seoul saw a steeper drop, of 0.09 percent, falling for the 10th consecutive week.

“As many of the potential buyers in Seoul are in waiting mode, only few transactions - urgent sales - are being completed,” said Lee Dong-hwan, head of the real-estate statistics department at the Korea Appraisal Board.

With apartment prices falling, real estate consumer confidence is dropping.

According to a study by the Korea Research Institute for Human Settlements, the real estate consumer-confidence index in December was at 90.7. A reading above 100 indicates that a majority of those polled are confident in the real estate market, while a reading below 100 indicates pessimism.

A reading below 95 indicates that the real estate market is trending downward. The December reading is the lowest ever since the index was first published 2011.

The reading for Seoul’s real estate market was at 93.9, which is down 12.6 points compared to the previous month. This is the first time since July 2012 - when it was 96.5 - that the confidence index was below 100 for Seoul.

Unsold apartments in areas outside of the greater Seoul area, including Gyeonggi and Incheon, have begun to pile up.

As of end of November last year, there were 60,000 unsold units, of which 90 percent, or 54,000, were located in areas other than Seoul.

“The worsening local economy and the excessive supply of new apartments were the biggest reasons behind the increase in unsold apartments,” said Byeon She-il, head of the real estate market research center at the Korea Research Institute for Human Settlements.

Many experts say the current situation will likely continue in the first half of this year.

“On top of the Sept. 13 regulations that tightened loan requirements, the taxable real estate price is expected to surge this year, and buyers are actually considering an apartment to occupy and those buying for investment purposes are waiting on the sidelines,” said Kim Eun-jin, head of research at real estate information provider Budongsan 114. “Especially since the government announced the areas in which new towns will be built, many are waiting for apartment prices to further fall, resulting in a further contraction of the real estate market.”

BY HAN EUN-HWA, KIM MIN-JOONG [lee.hojeong@joongang.co.kr]