Speculation Spurs Gangnam Home Prices

“You’d be considered rustic if you ask for the ‘actual pyeong.’ We only talk on terms of the (land) price. You should consider at least 60 million (won) per pyeong.”

On the afternoon of January 3, at a real estate agency in Samseong-dong, Gangnam-gu, Seoul, women in their forties and fifties are crowding the office despite its being the start of the year. They prefer to purchase multiplex houses or small-unit apartments.

The owner of the real estate agency is blunt. “If re-development does not happen, re-development of single-unit houses will occur. If the roads are altered to commercial zones, high-rise housing complexes will be possible, and plans are also being pursued to change the housing zones according to type.”

In this region, where a committee for redevelopment and reconstruction unions has not even been formed, semi-underground multiplex houses with a land mass of 8 pyeong (14 pyeong in building unit) are as expensive as 550 million won. The price per pyeong is close to Korea’s most expensive apartment in the region, I-Park.

With the real estate stabilization policy focusing on apartments and land, market funds are heading into multiplex housing, which is comparatively less restricted. Shady investments or hit-and-run sales have also been conducted in line with development plans to the underdeveloped areas such as New Town, pursued by local governments.

Multiplexes in Gangnam, Seoul Rise as Much as 40 Million Won In a Month

Multiplex houses are registered separately per household, making it relatively cheaper for purchasing, and the pricing is easier as it is based on the size of the land, attracting speculators.

Some multiplex housing areas in Gangnam, Seoul experienced a jump in prices up to twice its original price in one year.

In the Poi-dong, Gangnam area, the land price that ranged from 12 to 15 million won per pyeong is now more than 30 million won. A multiplex apartment with 8.4 pyeong in land mass, located at Nonhyun-dong, Gangnam, is now priced at 250 million won (the price of the entire building), which is an increase of 40 million won from the previous month.

A local real estate source said, “Seongnam in Gyeonggi-do is also around 18 million won per pyeong thanks to the redevelopment, so it’s normal for Gangnam to be this expensive,” and added, “we have almost no offerings for sale.”

The Gangbuk area in Seoul is game for ‘single hit sales’, using the vulnerability of the taxation policies and the local government’s development plans.

In the area around Hapjeong-dong, Mapo, a region set for balanced development, many multiplex houses outside the region are being transacted at a massive scale. This is due to the rumors that the region will be selected as the fourth New Town. Prices in Jeungsan-dong, Eunpyeong-gu jumped 20 percent after October last year after the rumor that “a large construction company surveyed the area.”

A source from a real estate agency in Hapjeong-dong said, “A semi-underground multiplex house with a land mass of 4.5 pyeong is around 95 million won, but the official price is not even 100 million won,” and added, “so that even if you own two houses per household, you’re not targeted by the heavy taxation policy for transfer of deeds.”

“No Development Plans in the Near Future”-

Areas experiencing mass investment of multiplex housing have the common factor of expectations that development plans may soon be laid out by the local government or construction companies.

But Seoul resolved that areas that were excluded from the redevelopment plans in 2004 would not be developed in the near future. Jung Byung-il, section head of the Seoul housing maintenance section said, “The redevelopment plans are set until 2010, and it would be extremely difficult to select other redevelopment areas before that.”

Rumors on the multiplex housing areas in Samseong-dong that preliminary agreements have been signed with a certain construction company for redevelopment have been found to be false. The relevant construction company flatly stated, “It’s not a profitable area, but strange rumors have been circulating.”

Park Won-gap, director of Speedbank, a real estate information company, said “The government is regulating apartment and land, leading to market funds concentrating on areas based on baseless rumors or random expectations of development,” and point out, “It is an instance showing the vulnerability of the government policies.”

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