Seoul apartments [Yonhap]
Seoul apartments [Yonhap]

Rising home prices and tighter mortgage regulations are pushing Seoul buyers to prioritize location over size. Demand for apartments with an exclusive use area of 40 square meters or less has surged, driving transaction volumes to a record high, while new price records are being set across Seoul and the broader metropolitan area.

Apartments of 40 square meters or less in Seoul recorded 3,985 transactions from January through May this year, according to the Korea Real Estate Board's real estate statistics system. That is up about 48 percent from the same period last year (2,692 transactions) and the highest figure since the data series began in 2006.

Micro-units also accounted for 11.6 percent of all Seoul apartment transactions during the period — the highest share in three years — meaning more than one in 10 apartments sold in Seoul this year fell into that category.

By district, Seongdong-gu led with 745 transactions, followed by Nowon-gu (473), Gangseo-gu (355), Guro-gu (326), Gangnam-gu (274) and Songpa-gu (229). The spread across districts suggests demand for micro-apartments is broad-based rather than confined to any single area.

Market observers say tighter mortgage rules are the primary driver pushing buyers toward smaller units.

Since last year's real estate policy measures, mortgage loan limits have been tiered by home price. Buyers can borrow up to 600 million won on homes priced at 1.5 billion won ($1.04 million) or less, up to 400 million won for homes in the 1.5 billion to 2.5 billion won range, and up to 200 million won for homes above 2.5 billion won.

Analysts say the caps have driven more buyers in their 20s and 30s to seek entry into prime Seoul locations through smaller, more affordable units.

Record-high transaction prices have followed.

A 39-square-meter unit in Suseo-dong, Gangnam-gu, sold in June for 1.69 billion won, setting a new price record for that floor plan, according to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system.

In Songpa-gu, a 25-square-meter unit at Munjeong Siyeong set a new high at 765 million won, while a 35-square-meter unit in the same complex sold for 890 million won — also a record. A 39-square-meter unit in the same complex likewise hit a new high at 1.25 billion won.

In Gangseo-gu, a 34-square-meter unit at the Gayang-dong Seongji 2nd complex sold for 738 million won and a 39-square-meter unit at the Gayang 6th complex fetched 950 million won, both setting new highs.

The trend extends beyond Seoul.

Transactions of apartments of 40 square meters or less in Gyeonggi Province also rose 28.5 percent year-on-year to 3,199 units in the January–May period.

Prices are climbing especially fast in the first-generation new towns, where expectations of reconstruction and remodeling are running high.

In Bundang-gu, Seongnam, a 35-square-meter unit at the Yangji Maeul 5th complex sold for 1.25 billion won and a 42-square-meter unit went for 1.48 billion won, both records. A 35-square-meter unit at Sibeom Hanyang also set a new high at 1.26 billion won.

In Dongan-gu, Anyang, a 49-square-meter unit at Hangaram Sekyeong sold for 750 million won and a 49-square-meter unit at Saetbyeol Hanyang 6th complex fetched 810 million won, each setting new highs.

The pre-sale market is showing the same pattern.

In June, the 39-square-meter Type A units at Summit The Hill, a redevelopment project in Heukseok District 11, drew a first-round average subscription ratio of 57-to-1. The 36-square-meter units at Acro River Sky also closed subscriptions at a ratio of 13.7-to-1.

The rise of single-person households is also fueling demand for micro-units. The average household size fell from 3.1 members in 2000 to 2.2 last year, according to the National Data Portal, and single-person households accounted for 36.6 percent of all households last year — the highest share on record.

The growing popularity of micro-apartments is pushing up their prices as well. At some complexes, the per-3.3-square-meter price of micro-units now exceeds that of larger units. At Bundang Sibeom Hanyang, the per-3.3-square-meter price of a 35-square-meter unit reached 84.33 million won at its record transaction price — higher than the 72.91 million won for a 59-square-meter unit and the 63.03 million won for an 84-square-meter unit.

"Among younger generations, there is a clear tendency to prioritize location over size," said Nam Hyeok-woo, a real estate researcher at Woori Bank. "More young buyers who lack sufficient funds are downsizing from what they originally had in mind in order to secure a better location."

Experts broadly expect the preference for micro-apartments to persist as long as current mortgage regulations remain in place. At the same time, they warn that as prices rise even for the smallest units, what was once a realistic path to homeownership may itself become increasingly out of reach.


rainbow@heraldcorp.com