[Report] "Would You Sell Your Gangnam House?"... Intensifying Trend of Owning One Smart Property

First Weekend After July 10 Real Estate Measures: Seoul Property Market
Intense Competition in 'Gangnam' with High-Price and Multi-Homeowners Concentration
"Without Supply Measures, House Prices Rise; Despite Tax Burden, People Are Holding On"
‘Gangbuk’ Also in Wait-and-See Mode... Will Rental Business Owners List Properties?
"With No Suitable Investment, Would They List Properties Despite Capital Gains Tax Burden?"

View of apartments from the Seoul Sky Observatory at Lotte World Tower, Songpa-gu, Seoul [Image source=Yonhap News]

[Asia Economy Reporters Inho Yoo, Yuri Kim, Onyu Lim] "Even the available listings are being withdrawn. Wealthy individuals owning multiple properties are calling to inquire about the best options due to the excessive tax burden. Both sales and jeonse (long-term lease) listings have completely dried up."

On the first weekend after the government's '7.10 Real Estate Measures' announcement, on the 11th and 12th, the Seoul housing market froze sharply?not only in the Gangnam 3 districts (Gangnam, Seocho, Songpa) but also in Gangbuk. Both buying and selling activities disappeared, with only tax-saving inquiries continuing. This atmosphere was distinctly different from previous government real estate policy announcements, which usually triggered a flood of transaction inquiries at brokerage offices. The unprecedented increase in tax burdens across holding, acquisition, and disposal made it difficult to gauge the potential impact of the measures.

Rather One Smart Property... Quiet but Steady in Gangnam

The real estate market in the Gangnam area, densely populated by high-priced and multi-homeowners, experienced intense cautious trading throughout the weekend. Instead of transactions, inquiries related to tax changes following the 7.10 measures dominated. The head of brokerage A in Daechi-dong, Gangnam-gu, said, "There haven't been many transaction inquiries since the announcement," adding, "Most calls are about how much the tax burden will increase." A representative from brokerage B in Apgujeong-dong noted, "Multi-homeowners are increasingly worried, but since the deadline extends until the first half of next year, they are not rushing to act," and added, "The already high capital gains tax burden has increased further, so even selling a home feels burdensome." A representative from brokerage C in Daechi-dong also said, "Multi-homeowners face significant tax burdens but seem to be holding on for now," explaining, "There is a learned expectation that prices will rise again if no supply measures are introduced."

In fact, the so-called 'one smart property' trend is becoming more pronounced under tax pressure. If reducing the number of owned homes is necessary, there is a movement to trade up to better locations within Gangnam. The head of brokerage D in Apgujeong-dong explained, "Some one-homeowners in Jamsil are disposing of their existing homes and moving to Apgujeong or Cheongdam-dong," but added, "Surprisingly, there are no urgent sale listings, so transactions are not easy."

Some express concerns that the government's measures may first impact the suburban housing market. Multi-homeowners feeling the burden of property taxes might prioritize disposing of properties outside Gangnam, such as in provincial areas. An industry insider questioned, "Even government officials sell only their provincial apartments and keep their Gangnam homes?who would want to sell a Gangnam property?"

Meanwhile, anxiety in the Gangnam jeonse market is growing. New jeonse listings have disappeared, while waiting demand continues to accumulate. A representative from brokerage E near Eunma Apartment in Daechi-dong said, "There are no jeonse listings. Each brokerage has two or three waiting clients asking to be contacted when a listing appears," and added, "Many landlords intend to move in themselves to meet the two-year residency requirement for reconstruction."

A real estate agency office in Seoul on the 6th / Photo by Hyunmin Kim kimhyun81@

Gangbuk Area Also "Let's Wait and See"

The outer Seoul areas, the epicenter of 'panic buying,' have also seen transactions halt. Buyers waiting for price adjustments due to fatigue from rapid short-term price increases and the government's measures are hesitant, while sellers are reluctant to lower asking prices easily due to the 'no supply measures' learned effect.

Whether in Nodogang (Nowon, Dobong, Gangbuk districts), Geumgwan-gu (Geumcheon, Gwanak, Guro districts), where mid-to-low price and rental business listings are concentrated, or Mayongseong (Mapo, Yongsan, Seongdong districts), known for high-priced listings, the prevailing mood is to "wait and see." A representative from brokerage F in Sanggye-dong, Nowon-gu, said, "Most listings are still priced several tens of millions of won above actual transaction prices." A representative from brokerage G near Mapo Raemian Prugio in Ahyeon-dong, Mapo-gu, said, "Perhaps due to multiple experiences with price rise learning effects, homeowners are not eager to lower asking prices despite the government measures."

Nodogang and Geumgwan-gu are areas with a high proportion of registered rental business owners in Seoul. Since the government has effectively abolished the registered rental business system in this measure, some expect these owners to put their properties on the market. The government plans to waive up to 30 million won in fines if owners voluntarily deregister before the rental obligation period ends to encourage sales. However, frontline brokerages say, "Without suitable alternative investments and with increased capital gains taxes, would they really list their properties?"

However, the industry anticipates a flood of multi-homeowner listings around the end of the year. From December, when this year's comprehensive real estate tax (종부세) bills are sent, urgent listings may appear due to the tax burden. The head of brokerage H in Samseong-dong said, "With both the 종부세 rate and official property prices set to rise significantly, unless one is a high-income cash-rich individual, the likelihood of listing properties is high."