By Jane Han
Staff Reporter
Property pundits have so far guessed that anywhere between 15 to 25 percent of the average apartment's price here is inflated, but two experts on Monday introduced a much higher estimate, at almost 70 percent of current prices, indicating a bubble about to pop.
Approximately 61 to 72 percent of the price hike from February 2001, when the domestic real estate value started to spike, to March last year is puffed up, according to Yoon Hyung-ho of the Seoul Development Institute, a public think tank, and professor An Chong-bum of Sungkyunkwan University.
Their speculation doesn't apply to all regions, however, but is limited only to the four areas that saw some of the biggest leaps, including Gangnam, Seocho, Songpa and Gangdong.
In a report addressing local real estate trends, the two said an apartment in Gangnam district more than tripled from 10.3 million won per 3.3 square meters to 35.41 million won over six years.
``This drastic hike isn't normal,'' said Yoon, explaining that about 68 percent of the specific price difference is a bubble.
He explained that the biggest reason for the giant bubble is banks' low interest rates that increased the money supply in the market, which ultimately pushed up asset values more than their fair value.
Yoon further added that ample liquidity despite limited new supplies also fanned investors expecting good returns to put money into the real estate market.
Although the domestic property market is seeing a combination of value deflation and market inactivity, other experts say that the bubble still doesn't exceed more than 30 percent.
Kim Eun-kyung, an analyst at local real estate consulting firm Speed Bank, said Korea's bubble isn't as severe as what people think.
She said bubbles tend to see steep, continuous deflation for an extended period of time, but the situation is different here. Apartment prices in the Seoul area have dropped about 0.01 to 0.10 percent for eight consecutive weeks, but returned to stability last week.