The property market in Dongtan, a district in Hwaseong, Gyeonggi Province, regarded as the biggest beneficiary of the semiconductor industry boom, is showing signs of overheating. As home prices have risen sharply, nearly 1,000 listings have disappeared since late last month, while asking prices have jumped by at least 300 million won within just 10 days. Amid expectations of further price increases, cases are mounting in which sellers break deals by returning deposits. With the trend appearing to move beyond a recovery phase into overheating, observers both inside and outside the market expect that additional regulated-zone designations for parts of Gyeonggi, including Dongtan, are imminent.
According to real estate big-data platform Asil, apartment listings in Dongtan, Hwaseong, totaled 3,691 as of Wednesday, down 21.1% from 4,673 on the 24th of last month, two weeks earlier. Apartment listings in Seoul and the greater metropolitan area declined rapidly after the moratorium on heavier capital gains taxes for multiple-home owners ended on the 9th of last month, with about 10,000 listings disappearing in each area over roughly a month. Dongtan's decline was the steepest among them, the largest across all 25 districts of Seoul and 47 cities and counties of Gyeonggi for which listing changes are separately tracked. While listings across all of Gyeonggi fell by 4,084 (-2.1%) over the two weeks, Dongtan alone accounted for about 1,000 of that decline.
The decline in Dongtan's listings resembles a typical bull market, analysts say. Amid strong buying demand, homeowners who have sensed the upward trend in prices are simultaneously raising asking prices and pulling listings off the market. Near Dongtan Station, evaluated as having the highest buying demand because it sits in the GTX-A line station area, complexes have emerged one after another raising asking prices by at least 300 million won above transaction prices recorded a month ago. At "Dongtan Station Sibeom Hanwha Kkum-e-Green," a 84-square-meter unit traded at 1.58 billion to 1.6 billion won on the 26th of last month, but asking prices jumped to 1.8 billion to 2 billion won within about two weeks. A 84-square-meter unit at "Dongtan Station Sibeom The Sharp Central City" also traded at 1.53 billion won early last month, but within a month only listings asking 2 billion won remained, even for low-floor units.
Cases of broken deals are also mounting. At "Dongtan Station Sibeom Woonam First Ville," two 70-square-meter units traded at 1.25 billion to 1.3 billion won and two 84-square-meter units traded at 1.455 billion to 1.5 billion won in mid-last month, but all contracts were cancelled in early this month. The head of a nearby real estate agency, A, said, "For 84-square-meter units, listings came out at around 1.5 billion won even in early last month, but from late in the month asking prices rose by 50 million won and 100 million won almost every week, and now expectations have climbed as high as 1.9 billion won." He added, "Sellers who think they sold too cheaply are renegotiating with buyers, and the mood is such that if the price doesn't match, they are willing to break contracts even accepting double-deposit compensation."
Industry players expect this atmosphere to continue for some time. Dongtan's overheating has been driven by Samsung Electronics bonuses of up to 600 million won before taxes and the introduction of new low-interest (1.5% per year) in-house loans providing up to 500 million won, according to analysts. The head of a real estate agency, B, said, "Not only Samsung employees who have come into large sums, but also investors expecting capital gains have begun showing interest in Dongtan." He added, "Asking prices have risen by hundreds of millions of won within a month, so deals aren't closing well, but in this atmosphere, even one expensive deal could trigger a chain of asking-price increases."
With the overheating becoming pronounced, an additional designation of Dongtan as a speculation-overheated zone is in the countdown, observers say. Under the Housing Act and other regulations, a region becomes a candidate for designation as an adjustment-target area if its housing price growth over the preceding three months exceeds 1.3 times the local inflation rate, and as a speculation-overheated zone if it exceeds 1.5 times. According to the Korea Real Estate Board, Dongtan's cumulative home price growth over the past three months was surveyed at 4.25%, far exceeding 2.06%, which is 1.5 times Gyeonggi's inflation rate of 1.38% over the same period. The three-month home price growth in unregulated metropolitan areas such as Guri (3.89%) and Yongin's Giheung district (3.08%) has also surpassed the threshold for speculation-overheated zone designation.
Experts forecast that the government will quickly play its regulatory card to block market overheating. If designated as a speculation-overheated zone, loan-to-value (LTV) regulations are strengthened, and restrictions also apply to first-priority subscription eligibility, repeat winning, and resale of pre-sale rights. If a land transaction permit zone is also designated, purchases not intended for actual residence will be restricted.
Yang Ji-young, an expert adviser at Shinhan Premier Pathfinder, said, "Since prices are already overheated, there is sufficient possibility of expanding regulated zones." She added, "Whether the government will selectively designate only certain areas such as Dongtan, Giheung, and Guri, or whether it will make broader additional designations, remains to be seen." Yoon Su-min, a real estate expert adviser at NH NongHyup Bank, also forecast, "For now, the requirements that would allow designation as a regulated zone have been met," adding, "If designated as a regulated zone, the effect on the market will be significant."
