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Property market shed $86M last month
November 19, 2009
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According to the Korea Realty Information Association, apartments in southern Seoul have been losing value for five straight weeks after the second week in October. Also, KRIA reported that the real estate prices of the so-called bubble seven areas, which include Gangnam and Bundang in Gyeonggi, have decreased by $86.65 billion in total last month. Last Saturday morning in Banpo Shopping Town in Jamwon-dong, the chill was obvious. There wasn’t a single customer in an area of around 10 real estate agencies. One real estate agent was even playing checkers on the computer to kill time. Another who asked to be named only as Kwon said, “I only managed one monthly rent deal this month. I’m scared that I might have to close my business soon.” The 20 real estate agencies in Gaepo Jugong Apartment Complex 1 in Gaepo-dong, which showed feverish buying and selling at the beginning of this year, also looked gloomy. “Calls of inquiry decreased to about one-fourth from that of two months ago,” said a real estate agent in the area. While answering a phone call from a customer who changed his mind about selling his 49 square-meter house at 1.05 billion won ($911,000) just around Chuseok, he replied, “You’ll have to lower your price to 970 million won now, or otherwise it won’t sell anytime soon.”
The freeze started after Chuseok, Korea’s Thanksgiving, early last month. Some urgent sales had to advertise apartment prices 10 percent lower than the previous month. Jamsil Jugong Apartment Complex 5, which is one of the star candidates for reconstruction, even saw a drop in prices, where a 112-square-meter apartment worth 1.27 billion won in September is now up for 1.15 billion won. Three reasons contribute to the recent, unusual fallback in the notoriously sky-high prices of Gangnam apartments. First, controls on loans have backfired. A real estate agent in Jamsil said, “After banks tightened regulations and DTI monitoring intensified, people have given up moving to Gangnam.” A debt-to-income ratio is the percentage of one’s monthly gross income that is dedicated toward paying back debt. Second, the policy of disclosing information on money has deterred buyers. One real estate agent in Jamwon-dong said, “In order to buy an apartment in a complex dated for reconstruction, you need around a billion won. It’s very rare that anyone can perfectly identify where all that money came from.” The third reason is that the spreading belief that housing prices have hit the ceiling. “Since housing prices have recovered to their peak in 2006, people believe any further rises in price are unlikely,” said a real estate broker in Dogok-dong. The overall prognosis of the real estate market in southern Seoul is that it will be hard to return to normal by early next year.
By Ham Jong-seon [ebusiness@joongang.co.kr] Real estate agencies in Jamsil-dong in Songpa District stand empty as the housing market in southern Seoul’s three districts including Songpa, which are the nation’s most popular, is now sluggish following the tightening of regulations on mortgages and the government’s plan to investigate investors’ sources of money in redevelopment areas. By Kwon Lee-sang |
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