Apartment Prices in Steepest Fall in 10 Years

Apartment prices have fallen at the fastest clip in 10 years amid sluggish demand. According to the Korea Real Estate Board on Thursday, apartment prices nationwide dropped 0.14 percent compared to a week ago, the steepest decline in 10 years.

The decline was particularly marked in the overheated Seoul metropolitan region at 0.18 percent. In Incheon prices fell 0.26 percent and in Gyeonggi Province 0.2 percent. Prices in Seoul fell 0.11 percent, particularly for mid to low-priced homes north of the Han River.

Jeonse or Korean-style deposit lease prices also fell 0.18 percent this week, the steepest fall since 2012, when the board began tallying weekly figures.

Some analysts said the latest price drop marks a normalization from runaway price growth last year.

The decline is mainly attributed to rising interest rates, which have suppressed buying demand by making it more expensive to borrow money. Some leveraged owners who are unable to service their debt are putting up their properties for sale, but almost no sales are made as there is no one interested in buying them.

The number of apartments available for jeonse is also rising as more and more tenants feel it is cheaper to rent than borrow money to come up with a lump-sum deposit lease.

The Bank of Korea's key rate hike on Thursday is likely to depress the real estate market further. Park Won-gap at Kookmin Bank said, "Until there are signals of an end to the rate-hike cycle, apartment sales will remain low and prices will continue to fall. People in their 20s and 30s have no motivation to borrow money to buy them."

Apartment prices have fallen the most in Nowon (0.23 percent), Dobong (0.22 percent) and Seongbuk (0.21 percent), which are all areas in northeastern Seoul where young people typically buy starter homes with housing loans.

But not everyone agrees that the decline is significant. Market researcher Kim Hak-ryul said, "Apartment sales volume in Seoul is so small that we can't say for certain that overall prices are falling, while prices in Incheon surged so much last year that a little adjustment is inevitable."

Only 628 apartments were sold in Seoul last month, down a whopping 87 percent from a year ago.