Ultra-small apartments of about 40 square meters are setting record prices one after another in Seoul's three Gangnam-area districts. While trading across the broader Gangnam apartment market has slowed under mortgage restrictions on expensive homes and heavier property tax burdens, buyers working with limited budgets are turning to the smallest units, where the price threshold is relatively low, to gain a foothold in the district.
A 27-square-meter unit at Richensz in Jamsil-dong, Songpa District, changed hands for 1.95 billion won ($1.4 million) on Sept. 28, a record for the unit type, according to the Ministry of Land, Infrastructure and Transport's actual transaction price system on the 1st. That marked a 450 million won jump in 10 days from the previous sale of 1.5 billion won on Sept. 18.
The same unit type traded at 1.4 billion won in early June, meaning the price climbed more than 500 million won in about three months.
The strength in ultra-small apartments extends beyond Songpa District to other parts of the Gangnam area. A 34-square-meter unit at Kkachi Village in Suseo-dong, Gangnam District, sold for 1.55 billion won on the 7th of last month, a record high. A 28-square-meter unit at Yeoksam I-Park in Yeoksam-dong, Gangnam District, also set a record when it traded at 1.15 billion won in August.
A 40-square-meter unit at Samsung Hillstate in Samseong-dong, Gangnam District, likewise sold for 1.95 billion won in August, just 40 million won below the record 1.99 billion won set in February.
Ultra-small apartments generally refer to homes of 50 square meters or less with one or two rooms. The same budget could buy a larger, newly built apartment on the outskirts of the greater Seoul area, but analysts say demand is flowing into small homes in the Gangnam area from buyers unwilling to give up shorter commutes and established neighborhood amenities.
Data from the Korea Real Estate Board show that the actual transaction price index for Seoul apartments of 40 square meters or less stood at 103.0 in July, up 3.05% from the previous month.
That gain was more than double the 1.46% rise for mid-small units of more than 60 square meters up to 85 square meters. Compared with 91.6 in the same period a year earlier, the index surged 12.44%.
Experts expect the preference for ultra-small apartments to persist for some time. Gap investment — buying a home while 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 in place.
Park Hap-soo, an adjunct professor at Konkuk University's Graduate School of Real Estate, said newlyweds and young owner-occupier buyers without sufficient funds will inevitably look at the smallest units as the government's strict mortgage rules continue. "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.
