The Two Faces of Gangnam Housing Prices... Listings Pile Up While Apgujeong Hits 6.7 Billion Won

Apgujeong Hyundai 7th Complex 245㎡ Sold for 6.7 Billion KRW in October
Highest Real Transaction Price in Gangnam Area This Year
"Preference for 'Smart Single Property' Due to Reconstruction Benefits and Multi-Homeowner Regulations"

[Asia Economy Reporter Onyu Lim] The apartment market in Seoul's Gangnam area, the target of government real estate regulations, is showing mixed trends. Although the number of urgent sales by multi-homeowners, who cannot bear the sharply increased tax burdens such as comprehensive real estate tax and capital gains tax, is rising, some high-priced apartments are instead setting new record prices and soaring in value. The market analysis suggests that government regulations are actually stimulating demand for a 'smart single home.'

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 27th, a 245㎡ (exclusive area) unit in Hyundai 7th Complex in Apgujeong-dong changed hands for 6.7 billion KRW on the 27th of last month. This price is 1.5 billion KRW higher than the actual transaction price of 5.2 billion KRW in May last year, marking the highest price among Gangnam apartments this year. It is also the fourth highest transaction price in all of Seoul. The most expensive apartment traded so far this year is Hanam The Hill in Hannam-dong, Yongsan-gu, at 7.75 billion KRW.

Recently, record-high transactions have been occurring frequently in medium-to-large apartments around Apgujeong-dong. A 183㎡ unit in Shin Hyundai 11th Complex was traded for 4.64 billion KRW on the 24th of last month, increasing its value by 140 million KRW compared to August. A representative from Apgujeong-dong A Real Estate Agency (licensed) explained, "More than 20 sales transactions were completed in this area just last week," adding, "As the establishment of the reconstruction association is imminent, buyers are actively stepping forward." This is quite different from the overall atmosphere in Gangnam, where transactions have stalled and urgent sales have piled up due to strengthened regulations on multi-homeowners such as holding and transaction taxes.

The active transactions in Apgujeong-dong seem to reflect expectations for the reconstruction project. Currently, in Apgujeong-dong, among six maintenance districts, five have reportedly secured the consent rate for applying for association approval: District 1 (Miseong 1st and 2nd Complexes), District 2 (Shin Hyundai 9th, 11th, and 12th Complexes), District 3 (Hyundai 1st to 7th, 10th, 13th, and 14th Complexes), District 4 (Hyundai 8th, Hanyang 3rd, 4th, and 6th Complexes), and District 5 (Hanyang 1st and 2nd Complexes). According to local real estate agencies, the government has strengthened its policy as part of the June 17 measures, stipulating that complexes applying for association approval after next year will only grant reconstruction move-in rights to residents who have lived there for two years, prompting a rush to expedite projects to avoid this.

Strengthened regulations on multi-homeowners, such as increased comprehensive real estate tax and capital gains tax, are also cited as background factors. Demand is flocking to Apgujeong-dong as multi-homeowners dispose of all existing homes and switch to a single property with high investment value. In fact, the number of comprehensive real estate tax payers and the tax amount this year surged by more than 25% compared to last year, reaching an all-time high. According to Shinhan Bank's Real Estate Investment Advisory Center, a two-homeowner with an 84㎡ unit in Eonma Apartment, Daechi-dong, Gangnam-gu, and an 84㎡ unit in Mapo Raemian Prugio, Ahyeon-dong, Mapo-gu, must pay 18.56 million KRW in comprehensive real estate tax this year. Considering the increase in tax rates and official property prices, next year’s payment will rise 2.6 times to 49.32 million KRW. A representative from Apgujeong-dong B Real Estate explained, "As the tax burden on multi-homeowners increases, there is considerable demand to dispose of several small-to-medium apartments and switch to medium-to-large apartments in Apgujeong-dong."

Kim Hak-ryeol, head of SmartTube Real Estate Research Institute, explained, "The record-high price trend in Apgujeong Hyundai is the result of a combination of the two-year reconstruction residency regulation, multi-homeowners’ preference for a smart single home, and abundant market liquidity."