Seoul Apartment Sales Plummet 80%

The apartment market in Seoul has been practically paralyzed amid skyrocketing prices, new lending curbs and rising interest rates.

Over the last year, apartment sales in Seoul plummeted 80 percent, especially in large complexes on the outskirts that had been popular among younger buyers when they were still affordable thanks to hefty loans. Now realtors say sales have dropped so sharply that it has become difficult to determine prices.

Analysis of sales at 88 different complexes with more than 2,000 households from 2020 to 2021 shows that there were only 560 sales in the fourth quarter of last year, down 79.6 percent on-year and 53.9 percent compared to all of 2020. That suggests that tightened housing loan restrictions and rising interest rates ended up crimping demand.

Market analyst Kim Hak-ryul said, "Large apartment complexes that are popular also tend to be more sensitive to changes in economic conditions and demand."

The decline was particularly marked in areas north of the Han River and lower-priced units. Sales in 48 large complexes south of the Han River declined 76.6 percent last year compared to 2020 to 305 , while sales north of the river dropped 82.3 percent to 255. Sales in districts like Nowon, Dobong and Gangbuk in northeastern Seoul dropped 84.2 percent.

Lee Nam-soo at Shinhan Bank said, "The decline has been particularly sharp for mid- to low-priced apartments because of toughened loan regulations in the second half of last year."

Most apartments in the affluent areas of southern Seoul cost more than W1.5 billion, meaning bank loans are not available and buyers bought them with their own money, so they ended up being less affected (US$1=W1,232).

The decline became even more pronounced this year, falling to just 102 sales in January, and none in almost half the complexes that were analyzed.

Prices are falling apace, but that is a double-edged sword. Another market analyst Koh Jong-hwan said, "As the prices of apartments decline further, people who took out huge loans to buy them in better times could end up with negative equity where their debts are higher than the value of the property. If costs increase sharply, people have no choice but to cut down on spending, which will have a negative impact on the economy as a whole in the longer term."