The three southern Seoul districts known as Gangnam, Seocho and Songpa accounted for the smallest share of the city's apartment transactions this year in August, as lending curbs and tax uncertainty squeezed high-priced deals and shifted activity toward more affordable neighborhoods.
The three districts made up 9.1% of Seoul apartment transactions in August, according to an analysis of Ministry of Land, Infrastructure and Transport transaction data by Ham Young-jin, head of the real estate research lab at Woori Bank, released on the 7th and based on figures compiled as of the 4th of this month. Their share stood at 12.9% in January, then climbed to 15.2% in April and 16.1% in May as owners of multiple homes put units on the market ahead of the May 9 expiration of a grace period on heavier capital gains taxes. Buyers have since turned cautious amid tighter taxation, lending curbs and the absence of a final version of the Aug. 3 tax overhaul.
Districts outside the three areas rose to 90.9% of transactions in August. Lending curbs weigh less heavily on those markets, and unstable prices and a shortage of listings in the lease market have pushed owner-occupier buyers into purchases. The concentration of demand in prime Gangnam-area districts has eased as lending and tax conditions changed.
Seoul apartment transactions have contracted as lending curbs and the tax overhaul were compounded by two consecutive months of interest rate increases. Volume rose from 5,373 deals in January to more than 8,000 in April and May, then fell back to the 5,000 range in June and July. August has recorded just 2,322 deals so far. The final tally could rise because the filing deadline for actual transaction reports has not passed, but the recovery has been limited.
Higher interest costs and tougher loan screening have concentrated deals in lower- and mid-priced homes, changing the mix by price bracket. Apartments priced at 900 million won or less rose to 54.3% of transactions in August from 47.1% in January, a gain of 7.2 percentage points and more than half the total. The 300 million to 600 million won bracket rose to 21.32% from 16.97%, and homes at 300 million won or less rose to 5.12% from 3.39%. By contrast, the bracket above 900 million won and below 1.5 billion won fell to 26.6% from 31.8%, and homes above 1.5 billion won fell to 19.08% from 21.07%.
"The final shape of the property tax overhaul has yet to be settled, and the possibility of further rate increases remains, so it is hard for the gap between what buyers and sellers want to close," Ham said. "A freeze and contraction in transactions is expected to continue for some time."
