Demand for Apartments in Seoul Wanes at Last

Demand for apartments is dropping sharply in the Seoul metropolitan area as the delayed effect of surging prices and home-loan restrictions kicks in.

The price surge is therefore also leveling out, with some apartments being put up for sale for hundreds of millions of won below market rates (US$1=W1,171).

According to KB Kookmin Bank last week, an index of apartment purchases stood at 86.1, down 8.4 points compared to the previous week. A reading below 100 shows there are more sellers than buyers. The index first fell below 100 on Oct. 4 as a panic-buying frenzy ebbed away.

The last time the index fell below 90 was in the third week of May (88.4). 

Koh Jong-hwan, a market analyst, said, "There were times in the past when the reading fell below 100 due to the government's massive housing-supply initiatives, but it quickly recovered. Recently, demand has shrunk due to soaring apartment prices and tightened loan regulations, so the downtrend is expected to last for some time."

The weekly growth rate of apartment prices also slowed. Korea Real Estate Board data shows Seoul apartment prices edging up just 0.17 percent last week, slowing down for the fourth straight week. Some apartments are being discounted already.

Price growth in Dongdaemun dwindled to 0.08 percent, in Seongbuk to 0.08 percent, in Geumcheon to 0.07 percent, in Dobong to up 0.1 percent and Nowon to 0.15 percent.

Only prices in upmarket parts south of the Han River are still rising significantly at 0.36 percent in Gangnam, 0.48 percent in Seocho and 0.38 percent in Songpa.

Housing loans were already difficult to obtain for Gangnam properties because of existing curbs on designated speculation zones, but now most of the capital is affected. Only the very rich can still afford to buy homes with cash, so the prices of low to mid-priced apartments could fall to more acceptable levels.