'Herd effect' driving frenzied purchases and sales of Seoul apartments

In Seoul’s red-hot apartment market, panic seems to move faster than policy. Apartment sales soared to their highest levels in nearly four years last month, only to nosedive weeks later.

Apartment complexes seen from Mount Namsan in central Seoul on July 7 [NEWS1]

In Seoul’s red-hot apartment market, panic seems to move faster than policy. Apartment sales in the Korean capital soared to their highest levels in nearly four years last month, only to nosedive weeks later — the latest twist in what analysts are calling a classic "herd effect."

As of Sunday, Seoul logged 10,341 apartment transactions in June, according to the city government’s real estate information site — the most since July 2020. With two weeks still left in the official reporting window, the final count is expected to top 12,000.

But the surge has already collapsed.

Following a surprise mortgage crackdown announced on June 27, transaction volume in July plummeted to just 605 deals as of Sunday, with the monthly tally now projected to fall below 4,000 for July.

The roller-coaster ride didn’t start overnight. Deals hovered in the 3,000s through January, then shot up to 6,635 in February and 10,327 in March. By April, transactions halved to 5,479, only to spike again in May and June as buyers rushed to lock in loans ahead of the new debt service ratio rules taking effect and flooded areas newly designated as land transaction permission zones.

Analysts blame the policy whiplash. But they also point a finger at the viral churn of unverified claims flying across YouTube channels, social media and real estate and parenting forums.

“Herd behavior is intensifying as consumers are exposed to the same types of information in real time,” said Park Won-gap, chief real estate analyst at KB Kookmin Bank.

Apartment complexes seen from Namsan in central Seoul on July 6 [NEWS1]

Among the most common rumors were warnings that the government would soon hike capital gains or property taxes or slap tighter housing regulations on the entire city. In May and June, social media platforms were filled with posts hyping record-breaking apartment sales — many later proved false — that fueled a fear of missing out on purchasing opportunities, particularly among first-time buyers.

Park said government officials have a role to play in cooling the fervor around the housing market.

According to real estate platform Zigbang, the number of apartment transactions in Seoul at record-high prices fell by 74 percent in the two weeks following the government's June 27 announcement of stricter lending rules. From June 27 to July 10, total transactions dropped from 4,693 in the previous two weeks to 1,312, while deals at record-high prices plummeted from 1,141 to 300.

The chaos hasn’t rattled every corner of the market. Properties sitting on Seoul's golden lands, in particular, have stayed largely immune. A 157-square-meter unit at Hyundai 7th complex in southern Seoul's Apgujeong-dong sold for 8.8 billion won ($6.36 million) on June 30, setting a record by 400 million won. Four days later, a 60-square-meter unit in Yeouido’s Sibeom apartment complex traded for 2.4 billion won, up from 2.335 billion won just days earlier.

Apartment buildings in Suwon, Gyeonggi, are pictured on Jan. 10, 2024, in this photo unrelated to the story. [NEWS1]

Elsewhere, the chill has been brutal. In Seongsan-dong, a 50-square-meter unit at Seongsan Siyoung complex plunged from 1.1 billion won on June 27 to 720 million won by July 1 — a nearly 400-million-won drop in days. Prices flattened in Garak-dong’s Helio City, where an 84-square-meter unit sold for 2.2 billion won both before and after the policy shift.

Some market watchers speculate that recent deals may reflect intra-family transfers designed to capitalize on falling prices.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY KIM TAE-YUN, LEE HYUN [kim.minyoung5@joongang.co.kr]