“I’m only excited about the 3 districts of Gangnam”, ‘Real estate polarization’ deepens in the outskirts and regions of Seoul

'Youngkkeuljok' put his property up for sale while crying, housing prices in the outskirts of Seoul are falling
The three districts of Gangnam held strong, and the price gap between the center and the outskirts widened again
Polarization of Seoul and local real estate remains, with house prices differing by more than KRW 1 billion

The sighs of homeowners who made a ‘purchase with soul’ in anticipation of rising house prices are deepening. This is because housing prices in the outskirts of Seoul, such as Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, and Guro-gu, where there was a lot of demand, are sliding. According to real estate research company Real Estate R114, house prices in Seoul fell 2.95% last year. While the overall real estate market is showing weakness, ‘polarization’ is especially noticeable in the outskirts and center of Seoul.

Gangnam 3 districts are rising, outlying areas are falling

The outskirts of Seoul, where mid- to low-priced apartments are concentrated, experienced a ‘severe cold season’ last year. This is because housing prices in most areas, including △Dobong (-8.95%) △Gwanak (-8.56%) △Gangbuk (-7.58%) △Guro (-7.33%) △Nowon (-6.98%), are sliding. The industry especially pays attention to the difference in market atmosphere between central Seoul and its outskirts, including Gangnam’s three districts. The difference in average house prices between the three districts of Nowon, Dobong, Gangbuk, and Gangnam was 1,691.3 billion won last year, an increase of about 20 million won compared to 2022 (1,672.36 million won). The gap between the three districts of Geumcheon, Gwanak, Guro, and Gangnam was also 1.697 billion won, a slight increase compared to 2022 (1.57116 billion won).

Real Estate R114 explains that the proportion of downturn transactions in outlying areas was particularly higher than in other areas. As the high interest rate situation continued, the burden of interest repayment increased rapidly, leading to a surge of properties for sale. In fact, the mid- to low-priced apartment market, which saw a lot of demand during the real estate boom, is quite sensitive to changes in financing conditions. In addition, the end of real estate policy loans for the common people, such as 50-year mortgage loans and special home loans, also had an impact on the price decline. On the other hand, since the high-priced apartment market, including the 3 districts of Gangnam, already has tight lending regulations, it is interpreted that there was no significant change in house prices even if market conditions worsened.

In the industry, there is growing support for the prediction that the polarization of housing prices in central Seoul and its outskirts will continue for some time. In fact, according to the report ‘Residential Segregation by Housing Price and Policy Implications’ published by the Korea Research Institute for Human Settlements on the 20th, the ‘spatial Gini coefficient’, an indicator indicating the level of residential segregation according to housing prices in Seoul, reached 0.38. In the field of income inequality, a Gini coefficient above 0.4 is interpreted as severe inequality, and when it is between 0.3 and below 0.4, inequality exists. This means that polarization in the real estate market in various parts of Seoul has already reached a serious level.

“You’re still in Seoul”, A sinking region

Real estate polarization is not a problem limited to Seoul. This is because the gap between the local and metropolitan real estate markets is also difficult to bridge. A representative example is the subscription market. According to the Seoul Real Estate Information Plaza, there were a total of 446 apartment sales and occupancy rights transactions in Seoul from January to September, an eight-fold increase compared to the same period last year (55 cases). The average competition rate for first place subscription in Seoul reached 66.3 to 1. On the other hand, the national average competition rate during the same period was only 9.8 to 1. This means that the real estate market outside of Seoul has already frozen.

The difference in apartment prices between Seoul and other regions is also noticeable. The price gap between regions began to widen noticeably in 2017. The difference in apartment prices between Seoul and other regions, which was around 521.89 million won in 2017, is △706.2 million won in 2018 △795.5 million won in 2019 △955.82 million won in 2020 △1.1984 billion won in 2021 △1.06855 billion in 2022 It has shown an increase in 10,000 won. As the gap of more than 1 billion won has persisted for several years, industry analysts say that polarization in the housing market has begun to solidify. Chronic problems such as preference for living in the metropolitan area and population decline in rural areas are said to be encouraging polarization.

While the joys and sorrows of each region are clearly different, some predict that the gap in the real estate market between regions will further deepen in the future. It is analyzed that demand is focused on apartments in Seoul, where residential preference is high, due to the burden of high interest rates and regulations on multiple homeowners, while local areas are unlikely to escape the recession as unsold units are piling up.