Korea's mortgage curbs push Gangnam buyers into the district's smallest flats at record prices

The same 1.95 billion won bought a 40-square-meter flat at Samsung Hillstate in Samseong-dong in August ^[8] and a 27-square-meter flat at Richensz in Jamsil-dong on Sept. 28 ^[3]. The Jamsil buyer got 13 fewer square meters for the money ^[7]. Per square meter, Richensz came to about 72.2 million won ^[1], against 48.75 million won at Samsung Hillstate ^[5], about 45.6 million won at Kkachi Village in Suseo-dong ^[3] and about 41.1 million won at Yeoksam I-Park ^[4].

The Richensz unit type also moved fast. It traded at 1.4 billion won in early June ^[5] and at 1.5 billion won on Sept. 18 ^[4]. The record therefore sits about 39% above the June price ^[6] and 30% above a sale ten days earlier ^[2]. That 30% comes from two sales.

These trades fit more than one story. Seoul Economic Daily's account is displacement: mortgage restrictions on expensive homes and heavier property taxes have slowed trading across the wider Gangnam market, and buyers on limited budgets are moving into the smallest units to get a foothold there ^[2]. A thin market fits too. Samsung Hillstate's August sale came in 40 million won under its February record of 1.99 billion won ^[8], so not every tiny unit is climbing, and a record set by a handful of sales can be undone by the next one. A third possibility is a citywide move. The Korea Real Estate Board's index for Seoul apartments of 40 square meters or less rose 3.05% in July, more than double the 1.46% gain for units of 60 to 85 square meters ^[10]. It stood 12.44% above its level a year earlier ^[11]. That index covers all of Seoul ^[10].

I think displacement is the best-supported reading, because the policy that would cause it is still in force. Gap investment, where a tenant's jeonse deposit covers most of the price, has been blocked across Seoul since the Oct. 15 policy package last year, and mortgage restrictions remain ^[13]. A buyer of a 1.95 billion won flat in Jamsil cannot lean on a tenant's deposit to close the purchase ^[13].

What these buyers give up is space. According to the paper, the same budget could buy a larger, newly built apartment on the outskirts of the greater Seoul area ^[12]. It attributes the choice to buyers unwilling to give up shorter commutes and established neighborhood amenities ^[12]. The report does not include an outskirts price, so the premium paid for the address cannot be measured from it.

Park Hap-soo, an adjunct professor at Konkuk University's Graduate School of Real Estate, said newlyweds and young owner-occupiers without enough money will inevitably look at the smallest units while the government's strict mortgage rules continue ^[14]. "Ultra-small units also carry a lighter tax burden than ultra-expensive homes, so they will draw even more interest in the resale market," he said ^[15].

The displacement view fails if the small-unit index stops beating the 60-to-85-square-meter band while the curbs stay on. In that case the July gap of 3.05% against 1.46% ^[10] would look like a summer run in a few complexes.