Apartment Prices Jump... Seoul's Top Villa Transaction District Faces 'Listing Drought' [Real Estate AtoZ]

Apartment Prices in Gangseo-gu Surge 9%, Four Times Last Year
Villa Jeonse Prices in Hwagok-dong Nearly Match Sales Prices
Supply Measures Lag Behind... Immediate Shortage of Affordable Homes

"It's still quiet, isn't it? There are no customers, and there are no properties."

The owner of real estate agency A near Hwagok Station, Gangseo-gu, Seoul, pointed to the empty office and commented, "Things have been quiet even with the autumn moving season approaching, as the surge of buyers in the first half of this year has now faded away." As homebuyers abandoned apartment purchases and sought alternatives, the villa (multi-family and row house) market—where there are typically the most transactions in Seoul—has seen its listings disappear.

A village of villas in Hwagok-dong, Gangseo-gu, Seoul. Old villas and multi-family houses are densely packed along the steep alleys. Photo by Choi Seoyun

Villa Transactions Concentrated Due to Alternative Demand... Jeonse Prices Chasing Sales Prices

The backdrop to this shift toward villas is the steep rise in apartment prices. According to the real estate industry on August 23, the Korea Real Estate Board's recently released weekly apartment price trend showed that, as of August 17, Gangseo-gu's sales price index rose 0.28% from the previous week. The pace of increase has accelerated for three consecutive weeks. The cumulative increase rate is 9.56%, more than four times last year’s rate (2%) for the same period. Jeonse (long-term deposit-based rent) prices have also jumped 5.63%. Last year’s rate for the same period was 2.04%.

As the entry barrier to apartments rose, both sales and lease demand focused on the relatively affordable villas in Hwagok-dong in the first half of this year. Hwagok-dong is a neighborhood where old red-brick villas and newly constructed multi-family houses are mixed along the alleys, and it is the most active transaction area in Seoul. As of August 21 this year, there have been 1,253 villa sale contracts and 3,686 jeonse/wolse (monthly rent) contracts in Hwagok-dong—the highest among all administrative districts in Seoul. This translates to an average of 5.4 sale contracts and 15.8 lease contracts per day.

With jeonse demand pouring into villas, jeonse prices have quickly caught up with sales prices. An analysis by The Asia Business Daily using the Ministry of Land, Infrastructure, and Transport's actual transaction system found that, from the beginning of this year through August 21, the median new jeonse price for row houses and multi-family units under 40 square meters in Hwagok-dong was 182 million won, up 7.1% from the same period last year (170 million won). For the same type of unit, the median sales price fell 5.1% from 216.1 million won to 205 million won. The price gap between sales and jeonse narrowed dramatically from 46.1 million won to 23 million won—almost half.

Typically, villa neighborhoods are seen as a stepping stone to someday purchasing an apartment, as one saves up the necessary funds. The owner of agency B in Hwagok-dong remarked, "Many office workers and newlyweds living in Hwagok-dong think of this neighborhood as a temporary place to stay," adding, "People often rent on jeonse or wolse while planning to move to an apartment later." He went on, "Even though people might live in a villa due to a lack of funds, they do not necessarily want to own one in their name. It is also difficult to sell later on."

However, as jeonse listings have dried up and the price gap between purchase and jeonse has shrunk to just around 20 million won, more people are deciding to buy homes outright. The owner of agency C in Hwagok-dong said, "With jeonse prices rising so sharply, many people now prefer to buy rather than rent. In March and April this year, even younger people and newlyweds who were looking for jeonse moved to buy. Those who wanted to buy have already made their purchases, so now there’s no inventory left."

In reality, villa transactions in Hwagok-dong peaked at 226 in March, then declined to 196 in April, 184 in May, 174 in June, and 151 in July. Over four months, transaction volume decreased by 33%. Cancelled contracts were excluded from these statistics.

New Supply ‘Dries Up’ After Jeonse Fraud... Policy Response Lags Behind, Low-to-Mid-Priced Housing Remains Strong

The lack of new supply has exacerbated the shortage of available properties. The owner of agency D in Hwagok-dong noted, "I think it’s been at least five or six years since anyone built a new villa in this area. Construction costs have gone up, and presales are not easy, so no new properties are coming out."

The decline in villa supply accelerated after the jeonse fraud scandals. Trust in the villa market crumbled, and with the tightening of real estate project financing (PF), project profitability worsened, cutting off supply entirely. The government has belatedly started working to restore supply, but there are still not enough homes available for immediate occupancy.

In the rapid housing supply plan announced on August 13, the government identified persistent sluggish housing starts since 2022 and delays in the recovery of private-sector and general housing supply as reasons for rising property and rental prices. Although it pledged to repeal multi-family and multi-household construction regulations and increase financial support for developers, it will take time for new homes to appear in the market. In the meantime, actual home seekers are unable to find either rental or for-sale villas easily.

The situation is similar in Sillim-dong, Gwanak-gu, the second most active area in Seoul for villa rental transactions. Both rental and affordable purchase properties are in short supply. The owner of a real estate agency in Sillim-dong stated, "With the autumn moving season ahead, we are getting steady inquiries from working professionals and young people looking for jeonse, but because there are so few rental units, some are now shifting to semi-jeonse or even purchasing. All the cheap homes were already taken in the first half of the year, so now it’s difficult for inquiries to translate into purchases."

As supply shortages and rising rental prices persist, analysts believe that prices for low- to mid-priced housing in Seoul are unlikely to decline anytime soon. In his recent report, "Impact of Real Estate Tax Reforms: Declining Lease Listings as Sale Listings Rise," Sangyoung Bae, a researcher at Daishin Securities, diagnosed, "With strong loan restrictions and limited supply, especially for apartments through 2030, the low- to mid-priced housing market will continue to see strong rent increases and high jeonse-to-price (jeonse-price ratio), making a price downturn unlikely."

This content was produced with the assistance of AI translation services.