'Tax Burden' Corporations Increase Year-End Property Sales... Most Purchased by Individuals

December Sales 50,087 Cases, Up 51% from Previous Month... Minimal Impact on House Price Decline

[Asia Economy Jo Gang-wook] It has been confirmed that a large number of corporation-owned housing listings flooded the market at the end of last year. This is due to the significant increase in tax burdens on housing held by corporations starting this year. However, since most of these were purchased by individuals, the government’s expected effect of lowering house prices did not materialize.

According to the housing transaction status from the Korea Real Estate Board on the 20th, the total number of houses sold by corporations nationwide last month was 50,087, a sharp increase of 51.1% compared to 33,152 units in the previous month.

This is the second highest monthly transaction volume last year, following July (50,642 units). July last year was when the government strengthened holding and transaction taxes on corporation-owned housing through measures such as the 6·17 and 7·10 policies.

The increase in corporate housing disposals at the end of last year appears to be influenced by the capital gains tax rate hike on corporation-held housing, which took effect this month. Until the end of last year, capital gains on corporate housing were taxed at the basic corporate tax rate (10?25%) plus an additional 10% rate, but from this month, the additional rate has been raised to 20%.

Last month, Gyeonggi Province recorded the highest number of corporate housing sales with 16,644 units. This was followed by △Busan 4,788 units △Seoul 4,275 units △Gyeongnam 4,001 units △Gyeongbuk 3,281 units △Chungnam 3,206 units △Daegu 2,524 units △Jeonbuk 2,181 units △Gwangju 1,961 units, in that order.

It was found that 92.4% of the corporate listings were purchased by individuals. The so-called ‘panic buying’ by individuals, driven by anxiety that house prices would rise further, absorbed the listings, resulting in a price decline effect that fell far short of expectations.

Park Hap-su, Senior Real Estate Specialist at KB Kookmin Bank, analyzed, "Due to continued expectations of rising house prices caused by supply shortages and demand switching from jeonse (long-term lease) difficulties, there was a large-scale purchase of corporation-held housing by individuals at the end of last year."