Seoul Apartment Market Cools as Permit Applications Drop, Prices Still Rise

Seoul's apartment market is currently characterized by a cautious wait-and-see approach from potential buyers and sellers. This sentiment has led to a notable decline in land transaction permit applications, which have fallen for three consecutive months. In July, the city recorded 4,681 new applications, a significant drop from the peak of 8,911 in April, before the expiration of a grace period for capital gains tax on multiple homeowners.

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The government announced plans to support the commencement of approximately 234,000 urban housing units by 2030 by providing incentives for private maintenance projects such as reconstruction and redevelopment.

The decrease is particularly pronounced in the city's most affluent areas. Applications in the Gangnam 3 districts (Gangnam, Seocho, Songpa) and the Yongsan district saw a combined decrease of 21.6% compared to June, significantly exceeding the overall city average reduction of 11.7%. Seoul city officials attribute this trend to stricter lending regulations and anticipation of tax reforms in these high-value housing markets. In contrast, areas like the northern and southwestern parts of the city, which feature apartments around the 600 million won mark eligible for policy loans, experienced a smaller decline due to sustained demand from genuine homebuyers.

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The decrease in applications in areas with concentrated high-priced housing is largely due to a wait-and-see attitude ahead of the announcement of loan regulations and tax reforms.

Interestingly, while the volume of transactions has decreased, the price of apartments for which permits are sought continues to climb. In July, the average price of apartments in land transaction permit applications rose by 1.41% from June, continuing a trend of steady increases since April. The southwestern districts, including Gangseo, Gwanak, Guro, and Geumcheon, showed a particularly strong price increase of 2.29% last month. Seoul city attributes this sustained price growth to continued demand for mid-priced apartments, driven by buyers who can leverage existing loan regulations.

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The impact of the government's policy to expand the scope of temporary suspension of the actual residency obligation in land transaction permit zones was not significant on the real estate market.

Seoul city is committed to transparency, regularly releasing data on land transaction permit applications and price fluctuations across its 25 districts. This initiative aims to reduce information gaps for citizens before they sign property contracts and to help them better understand the market dynamics. The city will continue to monitor the implementation of government tax reforms and market reactions, planning to release further analyses on application trends, price changes, and residential occupancy requirements in the coming months.

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Demand from genuine buyers continues for apartments around 600 million won, for which policy loans are available, resulting in a relatively smaller decrease in applications in the northern and southwestern regions.