The Korean property market seems to be grinding to a halt. The total number of apartments that were bought and sold last month stood at the lowest rate since 2006, when such data was first tabulated.
According to the Ministry of Land, Transportation and Maritime Affairs on Thursday, a total of 15,181 apartments were traded in January, down 76 percent from the previous month and just a third of the volume seen one year earlier. It was also less than half of the average volume (33,000) traded over the last three years.
In Seoul, volume dropped 72 percent on-year in January, or 64 percent in areas outside the capital.
Some 23,828 apartments were bought and sold in 2006, a number that increased steadily until 2008 but dropped to around 18,000 in 2009, in the wake of the global financial crisis triggered by the collapse of Lehman Brothers in the U.S. But trading volume rebounded over the next two years.
However, things took a sudden turn for the worse at the end of last year as certain tax benefits for people buying houses came to an end, leading to a drop in demand.
Until last year, people buying their first house or apartment worth less than W900 million (US$1=W1,132) paid acquisition tax equivalent to 1 percent of its value, but this rose to 2 percent this year.
If the first house or apartment is more than W900 million or a second property is purchased, the tax doubled from 2 percent to 4 percent.
"It looks like market sentiment took a hit due to multiple factors, including the Lunar New Year holidays in January, the recent extreme cold spell, jitters from the European fiscal crisis and the domestic economic slowdown," said an official at the ministry.