Apartment Prices in Gangnam Soared 3.7 Pt.

Despite the government`s housing stability measures, market prices of to-be-rebuilt apartments in Gangnam, Seoul, are reported to have increased further in recent days.

A realty market consultant, the Dr. Apt, reported that during September this year, prices of Gangnam apartments, which were scheduled to be reconstructed, soared 3.7% from the previous month. The price hike is about 1% higher than 2.8% increase on average for apartments in Seoul Metropolitan area.

By areas, apartment prices went up most in Songpa-gu with 4.9%, followed by Gangdong-gu with 4.3%, Gangnam-gu with 3.0%, and Seocho-gu with 1.3%.

As of September 30, a 15-pyong apartment in Jamsil Jugong 2 Complex in Songpa-gu was sold at 650 million won, up by 55 million won from the late August. A 17-pyong apartment in Jamsil Jugong 3 Complex also grew in its price by near 20 million won from 675 million won to 695 million won.

Prices of Eunma apartments in dachi-dong, Gangnam, have also been on steady increase after freefalling in the wake of the so called “September 5th announcement on realty stabilization”.

A 34-pyong Eunma apartment`s price once fell over 100 million won to 750 million won right after the government` announcement, yet recovered to 800 million won level recently. A 31-pyong apartment`s price recovered from 635 million won to up to 720 million won as well.

Besides, prices of apartments under reconstruction plans, such as Gaepo Jugong and Banpo Jugong apartments have rebounded almost to full recovery.

Over the recent rebounding apartment prices, real estate experts explained that the trend was attributable to people`s expectation returning from the apartment elsewhere to those scheduled to be rebuilt.

Researcher Kim, Hyun-a at the Construction and Economy Research Institute of Korea (CERIK) noted, “The government`s September 5th announcement generated an assumption of shrinking supply of medium to large size new apartment, which propelled the housing price hikes, which, in turn, drove people`s expectation to grow over investment in to-be-rebuilt apartments.”

The CERIK researcher also added, “Another driving force is the revitalizing investor confidence in Gangnam realty markets, which is believed to be the safest investment in unstable financial market conditions with declining foreign exchange rates and stock prices.”

“Since the regulation newly mandated those who sell their housing within less than a year of purchase to pay the capital gain tax from October this year, sales offers began to inundate the markets from those who want to avoid the tax burden”, said Kim, Gwang-suk, head of the Research and Analysis Department at Dr. APT. “The market prices began to rebound as the urgent sales offers have mostly been absorbed. ”

Chang-Won Kim changkim@donga.com