Gangnam Home Prices Plunge Over 500 Million Won in One Year

Home prices in Seoul's three Gangnam districts—where high-end apartments are concentrated—have turned downward for the first time in two years, with transaction prices falling by hundreds of millions of won compared to a year ago. With regulations expected to expand from multi-home owners to speculative single-home owners, concerns are rising that the downturn could become prolonged.

According to an analysis of Ministry of Land, Infrastructure and Transport transaction data by The Seoul Economic Daily on Monday, the average price of apartments sold in Gangnam-gu last month was 2.17 billion won, down 19.4% from 2.70 billion won in the same month last year. Prices have fallen by more than 500 million won in just one year. While specific figures may change as some transactions from last month may not yet be registered, the downward trend is unmistakable.

A 109-square-meter unit at Cheongdam Hyundai 3rd Complex in Gangnam-gu sold for 3.67 billion won on February 20 last year but traded at 3.4 billion won on the 3rd of last month—a decline of 270 million won. The gap is even wider compared to the most recent high: the same unit size sold for 4.5 billion won in January, making the latest sale 900 million won lower.

"Although the unit sold last month was on the first floor, even lower floors don't usually see such price differences," said the head of a nearby real estate agency. "Buyers are watching and waiting for prices to fall further, but the occasional transactions being completed seem to be dropping by hundreds of millions of won."

A 161-square-meter unit at Dongbu Centreville in Daechi-dong hit a record high of 6.8 billion won in September last year, but has since declined to 6.5 billion won in January and 6.2 billion won last month.

Asking prices are falling even faster. A 183-square-meter unit at Apgujeong Shin Hyundai Apartment recorded an all-time high of 12.8 billion won in December last year, but dropped to 11 billion won in January—a decline of 1.8 billion won in one month. Asking prices have now fallen to around 9.2 billion won. Fourteen listings are priced more than 1 billion won below recent transaction prices, with some listings posted in early last month still unsold.

"Demand for prime single properties has concentrated in the three Gangnam districts, causing areas like Apgujeong and Banpo to rise too steeply," said a real estate expert. "Even when asking prices are cut by hundreds of millions or even billions of won, it doesn't feel like a significant reduction. For ultra-luxury apartments priced above 5 billion won, the pool of potential buyers is limited no matter how much prices drop, so inventory inevitably piles up."

Seocho-gu and Songpa-gu, which have also turned downward along with Gangnam-gu, are showing similar declines in transaction prices. The average apartment price in Seocho-gu last month was 2.70 billion won, down 12.6% from 3.08 billion won a year earlier. Songpa-gu fell 5%, from 1.90 billion won to 1.80 billion won.

Meanwhile, areas in northern and southwestern Seoul with more apartments priced below 1.5 billion won—such as Gwanak-gu—have seen transaction prices rise compared to a year ago, driven by strong end-user demand and less restrictive lending rules. Gwanak-gu rose about 17%, from an average of 730 million won to 880 million won. Seongbuk-gu climbed approximately 16%, from 790 million won to 940 million won.

"Last month, areas including Gwanak-gu, Gangseo-gu, Seodaemun-gu, and Yeongdeungpo-gu led the upward trend," said a KB Real Estate official. "Apartments priced below 1.5 billion won are showing relative strength."

According to KB Real Estate's monthly national housing price survey released Monday, Seoul's home price outlook index for last month was 110.8, down 13.9 points from the previous month. The decline was larger in Gangnam than in Gangbuk, indicating weaker expectations for price increases in the Gangnam area.

The Korea Real Estate Board reported that the apartment supply-demand index for the three Gangnam districts and Gangdong-gu in the fourth week of last month stood at 100—the lowest since the fourth week of February last year. An index of 100 indicates balanced buying and selling pressure, suggesting the Gangnam market is shifting from a seller's market to a buyer's market.

The market had initially expected a simultaneous lockup of listings and price increases around May 9, when heavier capital gains taxes on multi-home owners take effect. However, President Lee Jae-myung's signals of aggressive tax reforms and financial regulations targeting speculative single-home owners have raised the possibility of a prolonged price decline.

"The current trend will likely continue until the capital gains tax surcharge takes effect," said Park Won-gap, chief real estate analyst at KB Kookmin Bank. "Depending on government policy, if non-resident single-home owners and rental housing operators join multi-home owners in selling, the weakness in home prices could persist for some time."