Is there a pitfall in real estate transactions in ‘this area’ of Seoul, where the report has been broken despite the transaction cliff?

Seocho-gu's 'Raemian Firstage' breaks record price of 39 billion won
The trading volume is at a cliff level, making it difficult to view the actual transaction price as a reference price.
Trading volume will decrease further in the future, caution is needed in investment trading

Recently, reported transactions have been repeated among complexes in Seocho-gu, Seoul, to the point where the term “real estate downturn” is meaningless. As the concentration of apartment sales in the market increases, upward transactions are occurring only in some popular complexes. However, overall real estate transaction volume is rapidly decreasing, and prices are expected to fall in the future, so caution is required when purchasing.

Seocho-gu, Seoul, house prices are rising but transaction volume is ‘dropping’

According to the Ministry of Land, Infrastructure and Transport’s actual transaction price disclosure system on the 8th, an 84㎡ exclusive use of ‘Raemian Firstage’ in Banpo-dong, Seocho-gu, Seoul was traded for 39 billion won last month, breaking the record price. In December 5,000, the same size was traded for 2022 billion won, but the price recovered within a year and changed hands. A 12㎡ unit exclusively for the same complex was also traded for 31 billion won in March of last year, but eight months later, in November of last year, it was traded for 1 billion won, showing a trend of recovering the actual transaction price. ‘Banpo Xi’ in Banpo-dong, Seocho-gu, a nearby area, also recently recorded a new price. The exclusive 135㎡ was traded for 3 billion won, an increase of 50 million won from the previous high of 8 billion won three months ago.

In fact, according to the Korea Real Estate Board on the 5th, despite the nationwide recession, the apartment sales supply and demand index was found to be rising in the Gangnam area and the downtown area among the five Seoul areas (northwest, southwestern, northeast, southeast, and downtown) in the first week of January. Among the two regions, the Gangnam area’s sales supply and demand index was 1, up 5%p from the previous week. This means that the price concentration phenomenon in the Seoul area is worsening. The apartment sales supply and demand index is an index of the proportion of supply and demand in the apartment market. Based on 85.8, the lower the number, the lower the demand for sales than supply.

However, due to the economic downturn, overall trading volume has plummeted. According to real estate R114, apartment transaction volume in Seoul in the fourth quarter of last year totaled 4, a 4,426% decrease from the previous quarter (1). Seocho-gu also saw a nearly 827% decrease in transaction volume in the fourth quarter compared to the previous quarter. Accordingly, real estate experts advise not to be deceived, saying that breaking the reported trading price while transaction volume is decreasing may be a price defense by homeowners. A real estate industry official said, “In the current market situation, the transaction burden will increase in the case of upper-class areas such as the Gangnam area in Seoul, and the transaction volume will decrease further.” He added, “The recent news of high-priced transactions appears to be an attempt by homeowners to raise the asking price. “A sharp decline in transactions can usually lead to a decline in prices, so you need to be careful when trading,” he said. Song Seung-hyun, CEO of City and Economy, also said, “The actual transaction price of real estate is only established when transaction volume is supported,” adding, “When transaction volume falls, various variables may come into play, so it is difficult to view the actual transaction price as a reference price.”

Don’t be fooled by the already observed real estate price ‘optical illusion’

A similar situation occurred two years ago. In August 2, 2022 m8 exclusively for Jamwon Lotte Castle Galaxy 2 (428 households) in Seocho-gu, Seoul was traded for 132 billion won, up 1 million won from the previous high price. The previous transaction was a year ago, in August 5,000, for 29 billion won. Although real estate prices appear to be on the rise based on the transaction trend of the same property, experts are of the opinion that it is actually a downward trend. This is because it is only by comparing transactions in other areas of the same complex that you can determine whether the price is truly rising or not.

In fact, in December 2021, the selling price of a small 12㎡ (25 pyeong) small exclusive use unit of 7.6㎡ based on supply in the same complex was 109 billion won. The transaction price is 30 million won higher than the actual transaction price for the 132㎡ exclusive space mentioned above. The two apartments have similar floor numbers, with 1 and 12 floors respectively. In response, an official from a nearby real estate agency at the time said, “This is an ‘optical illusion’ in real estate prices. “Due to recent market trends, it is difficult for real estate to avoid a downward trend,” he said. “As the exclusive 13㎡ unit was traded for 132 billion won, the price of the lower-floor property, which had the same asking price of 29 billion won, was lowered to 29 billion won.”