Seoul apartment prices fall at the fastest pace in 3 years

Economy

Published: 28 Aug. 2022, 18:00

Seoul apartment prices fall at the fastest pace in 3 years

Apartment complexes are seen from Mount Namsan in central Seoul on Aug. 25. [YONHAP]

Apartment prices in Seoul dropped at the fastest pace in more than three years as interest rates rise at a rapid pace in Korea and globally.

Prices of apartments in Seoul fell by 0.11 percent in the fourth week of August, compared to the previous week, according to data released by the Korea Real Estate Board (REB) on Thursday.

This is the biggest drop in 3 years and 5 months, when prices fell 0.11 percent in the first week of March 2019.

Housing prices in all 25 districts of Seoul fell, with prices dropping for 13 weeks straight.

Apartment prices in Nowon District, northern Seoul, dropped by 0.23 percent, Dobong District, northern Seoul, 0.22 percent and Seongbuk District, central Seoul, 0.21 percent.

Apartment prices outside of Seoul fell 0.18 percent, with prices in Gyeonggi dropping 0.20 percent and Incheon by 0.26 percent.

This is the biggest drop in 9 years and 7 months in these areas. Prices fell 0.19 percent in January 2013.

"Fewer people are willing to purchase apartments over concerns on additional raise in the base interest rate and the declining trend of housing prices," REB explained.

With the sharp rise in base interest rates, mortgage interest costs increase.

Currently, some banks are even offering floating rate mortgages at 6 percent. That is expected to rise to 7 percent this year.

The prices of new apartments that had been lived by residents for less than five years are falling the most in value. Prices of these new apartments decreased 0.54 percent from January to August this year, compared to the same period in the previous year, according to an analysis of transaction prices of real estate by Real Estate R114.

Prices of apartment buildings lived by residents for six to 10 years rose 0.86 percent and those that exceed 10 years increased 0.69 percent.

The price of an 84-square-meter (904 square-feet) apartment in Acro RiverHeim in Heukseok-dong, Dongjak District was 25.4 billion won in February, according to the Ministry of Land, Infrastructure and Transport's real estate transaction price disclosure system. A unit in the complex, which was opened to the residents in 2019, was sold at 19.8 billion won on July 25.

Korea is not the only country experiencing property price declines.

Housing prices in the United States fell 0.77 percent in July compared to the previous month, according to Black Knight. This is the first time in three years that the monthly housing price dropped and also the biggest drop since January 2011, according to CNBC.

Under a downturn scenario, Fitch Ratings warned housing activity could fall around 30 percent or more, and home prices may fall 10 to 15 percent.

BY KIM WON [cho.jungwoo1@joongang.co.kr]