Gangnam home prices rise on optimism

Home prices in rich residential areas in southern Seoul sharply rose this week as the government`s deregulation plans developed and lending became cheaper, industry watchers said yesterday.

The government`s approval of Lotte Group`s decade-long plan to build a 555-meter skyscraper in Jamsil, south of Seoul, last week has also prompted a rise in apartment prices in the area.

"Since the news about the Lotte World II and reports on rising housing price in Gangnam came out, we have four to five calls asking for mortgage lending each day," a mortgage consultant at a bank in Songpa was quoted as saying by Yonhap News Agency.

"Although the government is still considering whether to free three Gangnam districts from `speculation-watch zone` status, residents here hope that the government will soon ease the remaining housing regulations," the bank official said.

Late last year, the government said it would allow the sale of newly built apartments in Seoul and its neighboring areas one to five years after the initial purchase, starting this year. The Land Ministry, however, delayed its plan to lift some other core housing regulations - such as easing anti-speculative measures on the affluent Gangnam area, offering more tax reduction - expected to spur the sluggish property market.

Many potential buyers believe this is the right time to purchase apartments in Gangnam, as the average housing price has dropped nearly 10 percent from late 2006.

Apartment prices have been in decline since last year.

The average price of an apartment house is expected to drop as much as 10 percent in 2009 if the economy fails to rebound quickly from the credit crisis, according to Construction & Economy Research Institute of Korea. Housing prices will drop as much as they did in 1997-98 Asian financial crisis, the institute said. Housing prices tumbled 14 percent in 1998.

Lowered lending rate is another merit that potential buyers think.

"As buyers feel less burden on lending money from banks with lowered interest rate and also lowered housing price in Gangnam than a few years ago, the market has started to see a growing demand," an analyst said.

Last week, the Bank of Korea lowered the interest rate to a new low of 2.5 percent, the lowest since the central bank started setting policy rates.

Lending rate of mortgage loans on some banks entered 3 percent level, analysts said.

Experts say that most potential buyers asking for mortgages are affluent people wanting to move into a bigger house in Gangnam.

"With lending dropping rapidly, there are many VIP customers who want to move into bigger houses (in the same district) using a bank loan," a bank employee in Gangnam said.

There are some who are trying to buy houses with their children`s name to transfer their wealth, industry insiders said.

People with extra funds are eyeing apartments put on sale, they added.

"An increasing number of Koreans abroad buying houses in Gangnam seems to have stimulated the market," Kim Sun-duk, head of Korea Construction Industry Institute, said.

By Cho Chung-un



(christory@heraldm.com)