Low Demand, but Skyrocketed House Price

The price of houses, which was dormant during this summer season due to the low demand, shot up during last July.

Especially, the prices for the apartment units and condominiums in the Kangnam area (i.e. the southern part of Seoul) skyrocketed. Actually, however, real transactions were not made much on them, just raising the bidding price.

Kookmin Bank announced on August 8th that the July composite index for the nationwide house transactions recorded 114.8, 1.0% higher than that in June. The report demonstrated well the strange phenomenon of rising house price, since the increasing rate is much higher than those for May and June (0.4 ~ 0.6%).

Noticeably, Seoul has witnessed an average of 2.0% hike. In detail, apartment units in the Kangnam area shot up by 2.8% and condos in the same area 2.3%. In contrast, the figures for May were 0.4% for the former and 1.5% for the latter, and for June 0.9% for both of them.

On the other hand, the price increased only by 0.5% in localities and other major cities during July.

Koh Hae-jin, a researcher at Kookmin Bank, explained, “The trend is explained this way. The people looking for apartment units are waiting since the price has shot up beyond their purchase power. On the other hand, the prospective sellers are raising the price or putting their units off sale in expectation of more increases. Unlike the past, people tend to move while their children are on vacation. Thus, the demand rises the price during January to March or July to September.”

In the meanwhile, the composite index for charting houses recorded 144.9 for July, a 0.3% increase compared with that for June.

Geographically, 0.9% increase in Seoul and 0.3% in major cities were recorded while it decreased 0.2% in local cities.

The Kangnam area in Seoul well exceeded the nationwide average by 1.2% for apartment units, 1.7% for condos and 0.3% for single houses. In contrast, the Kangbook area (i.e. northern part of Seoul) witnessed 0.9% increase for apartments and 0.7% for singles houses, and 0.2% decrease for condominiums.

Research Koh also added, “The uprising trend of house-charting price was relieved a little due to the increased supply. But the charting price has increased due to the rising demand caused by people planning to move during their children’s vacation.”

Do-Young Kim nirvana1@donga.com