Gangnam Plummets by 3.5 Billion Won, Dongtan Surges 21%? South Korea's Real Estate Market Splits Into Three [News File]

High-end apartments in Apgujeong-dong, Gangnam-gu, Seoul, have recently been selling for billions of won less. For a 183-square-meter unit in Apgujeong District 2, the complex hit an all-time high when it sold for 12.8 billion won in December of last year. However, entering this year, it traded for 10 billion won in July, and this month it sold for 9.3 billion won. This marks a 3.5 billion won drop from its peak. An adjacent complex also sold for 11.25 billion won in July, but traded for 10 billion won in September and 8.8 billion won this month. Such successive transactions featuring multi-billion-won drops are analyzed to be driven by regulations that restrict property sales once reconstruction projects get underway in earnest. District 2, which has the fastest reconstruction speed in Apgujeong, plans to apply for project implementation approval around early next month. By law, reconstruction complexes in overheated speculation districts are virtually prohibited from selling homes after applying for project implementation planning approval, with only a few extreme exceptions.

[Park In-goo / Apgujeong Real Estate Agent: "Once you apply for project implementation approval, the transfer of union member status is restricted in principle. Therefore, it seems some properties are coming out as urgent sales to sell ahead of that time."]

This has been compounded by the impact of the government's tax revision plan announced on August 3. The government is pushing to significantly increase the comprehensive real estate holding tax burden on ultra-luxury homes, while capping the long-term holding special deduction limit at 1 billion won regarding capital gains tax incurred when selling a home.

[Apgujeong Apartment Union Member: "Since the average age is over 60, cash flow is low, but the comprehensive real estate holding tax seems like it will go up about 3 to 4 times. (Elderly residents who have lived here for a long time either have to leave or cannot withstand the burden...)"]

The downturn in the Greater Gangnam area has been pronounced since the August 3 tax revision announcement. Because taxes are expected to rise significantly, quite a few owners want to sell, but buyers face loan blocks, allowing only some cash-rich individuals to absorb high-end apartment listings in Gangnam. The "Gangnam 3" districts (Gangnam, Seocho, and Songpa) have been on a downward trend for 9 consecutive weeks. As of October 26, weekly apartment sales prices dropped by the 0.3% range in Gangnam and Seocho, and by the 0.2% range in Songpa. However, all other areas in Seoul excluding the Gangnam 3 districts continue to rise. For Seoul as a whole, prices rose by 0.09% over the week.

Recently, outer areas of Seoul have been rising, with Seongbuk-gu up 0.39%, Seodaemun-gu up 0.36%, and Gangbuk-gu and Dobong-gu up 0.32% each. Moreover, southern Gyeonggi areas located within the semiconductor belt near Samsung Electronics and SK Hynix—the so-called shuttle bus-accessible transit zones—have shown fierce upward momentum in the second half of this year. Sales prices in Dongtan, Hwaseong surged by a staggering 21% this year, while Gwangmyeong rose 17%, Yeongtong-gu in Suwon rose 17%, and Guri and Hanam rose in the 13% range. Compared to the 8.7% rise in Seoul's overall housing prices this year, these are much higher figures.

To summarize, Seoul's market in the second half of this year is largely divided into three paths. First, the Gangnam 3 districts continue their downward trend. The Han River belt areas excluding the Gangnam region—such as Dongjak, Seongdong, and Yeongdeungpo—have seen slightly reduced upward momentum. Outer areas referred to by terms like "Nowon-Dobong-Gangbuk" and "Geumcheon-Gwanak-Jungnang" still show high growth rates. This is because government policies tend to divide market directions based on sale price thresholds of 1.5 billion won and 3 billion won. Gangnam is heading downward, the rest of the Han River belt is taking a breather, and outer areas are catching up—a dynamic akin to the Three Kingdoms, which could be metaphorically described as a "three-way split of Seoul." How long these directions will last depends on changes in government policy or the impact of high interest rates, so we will have to keep watching.

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