Although Dongtan district in Hwaseong, Giheung district in Yongin and Guri in Gyeonggi Province were designated as regulatory zones and land transaction permit zones effective the 1st of this month, the uptrend in apartment prices in the Seoul metropolitan area has hardly slowed and continues to climb. The rate of increase in Gyeonggi apartment prices widened from the previous week, and Yeongtong district in Suwon, which shares a living zone with Hwaseong's Dongtan, jumped more than 1% in just one week. A "balloon effect" also emerged, with home prices rising in areas adjacent to the newly regulated zones, including Byeongjeom district in Hwaseong, Gwonseon district in Suwon and Namyangju.
According to the weekly apartment price trends for the first week of July (based on the 6th) released by the Korea Real Estate Board on the 9th, apartment sale prices in the Seoul metropolitan area rose 0.22% from the previous week, widening from the 0.20% gain a week earlier. Seoul rose 0.30%, expanding from 0.27% the previous week, while Gyeonggi also saw its increase widen from 0.19% to 0.23%.
The government designated Hwaseong's Dongtan, Yongin's Giheung and Guri as regulatory zones and land transaction permit zones on the 30th of last month, but the price uptrend did not easily reverse. Hwaseong's Dongtan rose 1.29% this week, continuing gains in the 1% range. After posting 2.22% in the third week of June, its increases narrowed to 1.65%, 1.46% and 1.29%, but the level remains high. Yongin's Giheung widened from 0.39% the previous week to 0.56%, and Guri expanded from 0.30% to 0.64%. This is interpreted as the effect of last-minute buying demand ahead of the regulatory zone designations.
Gains also continued in existing regulatory zones. Suwon's Yeongtong rose 1.19% this week, with the increase nearly tripling from 0.41% the previous week. Even though Suwon's Yeongtong was already included in regulatory zones under last year's Oct. 15 measures, its gain widened significantly this week. This is why some interpret that a land transaction permit zone designation alone is difficult to curb expectations of price increases and buying demand. The influx of buyers is attributed to the area sharing a living zone with Hwaseong's Dongtan, along with the relatively prominent price accessibility of small and mid-sized complexes in the Mangpo-dong area of Yeongtong district.
"Driven by expectations of a booming semiconductor industry, the price trend in southern Gyeonggi residential areas that began in Dongtan is still showing strength," said Nam Hyuk-woo, a real estate researcher at Woori Bank. "While Dongtan's gains have narrowed due to the burden of price increases and the regulatory zone designation, demand is shifting to areas with a concentration of relatively cheaper apartments."
As price gains widen in adjacent areas not designated as regulatory zones, signs of a balloon effect are emerging. Hwaseong's Byeongjeom widened from 0.16% the previous week to 0.25% this week, and Namyangju rose from 0.16% to 0.21%. Suwon's Gwonseon also rose 0.26%, a slight expansion from the previous week.
Rising jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent) prices are also cited as a factor supporting sale prices. This week, apartment jeonse prices nationwide rose 0.12%, while the Seoul metropolitan area rose 0.20%, Seoul 0.31% and Gyeonggi 0.17%. In Gyeonggi, jeonse prices in Suwon's Yeongtong rose 0.49%, while Guri and Hwaseong's Dongtan each rose 0.36%. "As both sale and jeonse prices rise together, the housing cost burden on end-users will grow even larger," Nam said. "However, if the reduction in mortgage loan limits by the financial sector leads to a contraction in transactions and demand, the pace of home price increases could slow somewhat."
