The average price of houses in South Korea dropped for the first time in two years, related data showed Thursday, offering another clear indication of the country's struggling housing market.

The average price of homes across the country dropped 0.1 percent from a month earlier in July, according to the data released by Kookmin Bank, the largest bank in South Korea. July marks the first time since July 2010 the average price of houses dropped from the previous month.

The drop was partly led by a dip in prices of large apartments, which fell for the second consecutive month in July.

But this time, the average price of smaller apartment units also fell from a month earlier, pulling down the average price of all houses in the country, according to the data.

The drop was more severe in Seoul and surrounding Gyeonggi Province that together are home to nearly half of the country's 50 million population.

The average price of homes in Seoul slipped 0.4 percent from a month earlier in July with that of houses in the rest of the Seoul metropolitan area also dipping 0.4 percent.

Market observers believe the drop is partly caused by worsening economic conditions and high interest rates that discourage real estate investment, which, in turn, are creating ever deteriorating conditions for the country's builders.

As of the end of June, 62,288 new homes remained unsold, the Ministry of Land, Transport and Maritime Affairs said earlier.

A business survey index (BSI) of construction companies for August came to 64.3, according to the Construction Economy Research Institute. A BSI reading above 100 means a majority of surveyed companies believe their business conditions will improve with a reading below the 100 mark means pessimists outnumber optimists.

With fewer and fewer people wanting to buy homes, more are forced to rent or lease houses, which is driving up house rental prices despite a fall in the prices of houses.

The gap between the average price of houses and rental costs has narrowed to one of the lowest as the average cost of deposit-based lease houses in Seoul gained 0.2 percent from a month earlier in July.

(Yonhap News)