Prices of cheaper apartments are rising

Economy

Published: 28 Aug. 2020, 18:22

Prices of cheaper apartments are rising

A view of Banpo-dong in Seocho District, southern Seoul. [YONHAP]

While real estate prices in the greater Seoul areas seem to be stabilizing, prices of cheaper apartments are rising.

With three controversial real estate bills railroaded through the legislature by the ruling Democratic Party (DP) last month, as well as concerns over the spread of the coronavirus, the number of apartment transactions in Seoul decreased last week, and prices were flat.

According to the Korea Appraisal Board, Seoul apartment prices rose by 0.01 percent between Aug. 17 to 24, compared to a 0.02 percent rise the week before.

An 84.9-square-meter (913.8-square-foot) flat in the Banpo Xi apartment complex in Banpo-dong, southern Seoul, sold for 2.85 billion won ($2.41 million) on July 8. An identical unit sold for 2.44 billion won on Aug. 18, a 14 percent decline.

But smaller and cheaper apartments have seen greater price gains.

KB Kookmin Bank divides Seoul apartments into five levels by price. The average price of apartments in the bottom 20 percent in August was about 431 million won, up 37.8 percent compared to two years earlier. The average price of apartments in the top 20 percent was about 1.88 billion won, a 21.5 percent increase.

Comparing to prices a year earlier, prices of apartments in the bottom 20 percent jumped by 19.5 percent compared to 12.9 percent for apartments in the top 20 percent.

In other words, a person with 313 million won could have purchased a property in the bottom 20 percent two years ago, but would need an additional 118 million won to get the same one today.

Jeonse prices in Seoul continued climbing for the 61st consecutive month.

Under Korea’s unique jeonse system, a person puts down a large lump-sum deposit in order to live in a property for a number of years. The deposit is refunded without interest at the end of the contract.

According to the Korea Appraisal Board, jeonse prices for Seoul apartments in the fourth week of the month increased 0.11 percent compared to the previous week.

The increase was led by apartments in Gangnam District, Songpa District and Seongbuk District, all of which jumped by 0.16 percent, followed by flats in Seocho District and Mapo District, which rose 0.15 percent.

A shortage of jeonse apartments in Seoul is becoming a serious problem. With the ruling party’s bills designed to protect tenants last month, many landlords are now opting to charge monthly rent rather than jeonse.

As of Aug. 25, the number of jeonse transactions in Seoul was 2,520 this month, only 29 percent of the total number of trades made during the same month a year earlier, according to data by Seoul Metropolitan Government. The number of jeonse transactions made in July was also only about 75 percent of the same period last year.

Prices of apartments in buildings with fewer than four stories in Seoul are also soaring.

The average price of such units, as of the end of July, increased 0.54 percent compared to a year earlier while the jeonse price for such units was up 0.44 percent compared to a year before.

BY CHOI HYUN-JU, AHN HYO-SUNG AND CHEA SARAH [chea.sarah@joongang.co.kr]