Chilling Property Markets in Korea

The real estate market has begun to lose steam in Korea as the government has come forth with measures to curb the overheated property market and seasonal factors which have begun to take effect.

Market prices are staggering on their uphill trends, especially for speculation-prone apartments, which were scheduled for reconstruction, while an apartment premium hike has slowed due to sluggish transactions. On the other hand, the number of apartments, put on sale and through auctions, is increasing.

Apartment price hikes have stalled.

According to a market survey on the property market last week, the weekly growth rate for housing prices in the Seoul Metropolitan City has shrunken almost by half.

In a survey, Kookmin Bank reported that the weekly growth rate of Seoul city apartment prices stood at 0.3% last week, down from 0.6% a week before. The nationwide growth rate marked at a meager 0.3%, down from 0.5% a week earlier.

A property consultant, Uniasset, also announced in its report that the Seoul city apartment price growth rate drastically went down by 0.44% last week from a previous week‘s 0.93%.

In particular, those apartments, which sit in the metropolitan areas including Seoul and were allowed to rebuild, witnessed the stiffest drop in their prices. Previously, these apartments have been at the front of the housing price hikes.

According to Property 114, a property market consultant, the price increase rate for the “to-be-rebuilt apartment” has declined sharply from 2.52% to 0.46% last week. In real transactions, the 29-pyeong Gaenari APT in Seoul Gangnam sold for 790 million won, down by 10 million. Also, a 15-pyeong Gwonsun-Jugong-yicha APT, located in Suwon, Gyunggi Province, witnessed a 10 million won drop in its price to sell for 200 million won.

As the transaction cooled down, apartment premiums have also slid. According to a report released on May 1 by the Ministry of Finance and Economy, the premiums for newly built apartments have shrunk by 10.7 to 33.3% as of April 30 over a week ago.

For instance, a Seoul Dogok-Jugong-yicha APT of 26 pyeong saw its premium go down from 60 million to 50 million won. The premium for the 31-pyeong Human Touchville in Gangnam Seoul dropped from 150 million to 130 million won as well.

The number of court auction articles marked a record high in May.

Auction property is rapidly increasing in the wake of the economic recession. As of last month, the number of newly registered articles for auction at courts, across the nation marked record highs at 11,279, since April last year heralded 11,622 cases.

The number of new housing for auction has been on a steady increase for the past three months from 6,063 in February to 7,101 in March and to 9,176 in April. Accordingly, the bid number has grown last month to mark 26,777, the highest this year.

Court auction market watchers predict the current trend to continue for a while as the economy deteriorated at a higher pace.

Unsold apartments become common.

Since April this year, an increasing number of apartments have failed to find buyers. The Ministry of Construction and Transportation announced that as of the end of April 24, 961 houses in the nation were vacant, which showed a 5.9% increase from 23,568 at the end of March.

Nation-wide, the number of unsold apartments had increased from October last year up until January this year, when the number slightly reduced by seasonal factors, before turning downward two to three months later again.

The number of unoccupied apartments is expected to grow further since new regulations have been implemented starting May, which forbids housing sales in speculative areas until a purchaser moves into the house and completes his/her property registration process.

Chang-Won Kim changkim@donga.com