Korea’s Feb. apartment transaction price index gains for first time in 10 months

Apartment complex in Seoul [Photo by Han Joo-hyung]

Apartment transactions in South Korea nearly doubled in February from a month ago as quick sales increased following the government’s deregulation measures earlier this year.

According to data from the Korea Real Estate Board on Tuesday, the nationwide apartment transaction price index rose 1.08 percent in February from the previous month, gaining for the first time since 0.46 percent in April last year. The index rebounded on a rise in quick sale transactions in February, with the purchase price going above the previous transaction price in some regions as the government lifted restrictions on most of the previously-regulated regions in Korea at the beginning of the year.

According to the Ministry of Land, Infrastructure and Transport, the number of apartments traded nationwide stood at 31,337 units in February, up 75.6 percent from 17,841 in the previous month. It is only about half of the average transaction volume over the past five years but analysts note that it can be seen as a signal breaking away from the real estate slump that continued from last year.

In Seoul, apartment transactions stood at 2,286 units in February, up 96.9 percent from 1,161 units in January, and those in the surrounding Gyeonggi Province and Incheon was 12,294 units, up 94.2 percent from 6,332 in the previous month, according to the ministry.

The rise in apartment transactions was also driven by the special housing loan launched by the government in January.

According to the Korea Housing Finance Corp., a total of 113,000 applications for special housing loans were submitted as of the end of March. Existing loan repayment accounted for the biggest reason for taking out the loan with 56,000 applications, but the proportion of new housing purchases was also high with 49,000 applications.

By region, the actual transaction price index for apartments in Seoul rose 1.85 percent in February from the previous month, rising for two straight months from January.

The increase in the actual transaction price index was the highest in Seoul’s southeastern region at 2.28 percent, among the five major regions in Seoul.

[Photo by MK DB]

Incheon Metropolitan City and Gyeonggi Province also saw a rise in the actual transaction prices, 0.78 percent and 1.83 percent, respectively. This led the actual transaction price index for the entire metropolitan area to also gain 1.7 percent, a rebound in 10 months.

The actual transaction price index in local districts also rose 0.46 percent for the first time since 0.51 percent in April last year. The index of Sejong City was the highest, going up 2.99 percent from the previous month on the back of quick sale transactions.

The uptrend is expected to continue until March as transactions are on the rise.

According to Seoul City data, the number of apartment transactions in Seoul based on the contract date last month was 2,743 units on Tuesday, exceeding the 2,462 units of February.

The number of March transactions is expected to increase further as the deadline for transaction reports of March contracts is the end of April.

According to preliminary data of the Korea Real Estate Board, the actual transaction price index for March is projected to increase 1.06 percent nationwide and 1.53 percent in Seoul from February.

Critics, however, yet say that it is not sufficient to conclude that housing prices will go up for the long term as many internal and external factors such as insolvency risks of real estate project financing still exist.

“The recent rise in the actual transaction price index is a temporary increase led by quick sales, and the prices can drop again if higher ask prices lead to less transactions,” said Park Won-gap, a senior real estate expert at KB Kookmin Bank. “A turnaround may be premature as many unfavorable factors such as the global economic uncertainties and slowing domestic economic growth still remain unresolved.”