Housing Market, Unprecedented Regulatory Era Begins

Multiple Homeowners Face Heavy Comprehensive Real Estate and Capital Gains Taxes
Tomorrow Marks Implementation of Jeonse and Monthly Rent Reporting System
Seoul Sales and Rentals Become 'Precious'
Rising House Prices Lead to Gifts Over Sales

[Asia Economy Reporter Kangwook Cho] The housing market is facing unprecedented regulatory measures. With the simultaneous implementation of comprehensive real estate tax and capital gains tax surcharges on multi-homeowners, along with the mandatory reporting system for jeonse and monthly rent starting from the 1st of next month, signs of a deepening transaction and listing freeze are emerging. The government confidently calls these regulations the 'final chapter' of the housing price stabilization measures pursued over the past four years. However, concerns are growing that the excessive transaction tax burden will not only deter multi-homeowners but also suppress transactions among single-homeowners, leading to a prolonged transaction freeze. ▶Related article on page 3

According to the Seoul Real Estate Information Plaza on the 31st, apartment transaction volumes in Seoul have been declining for four consecutive months from December last year to April this year. The number of sales, which was 7,524 in December last year, sharply decreased to 5,774 in January, 3,865 in February, 3,774 in March, and 3,610 in April this year. Although the reporting period for May transactions is still open, the number recorded by this day is 2,218, and the prevailing view is that it will shrink further compared to the previous month. Apartment transactions in the Gyeonggi region also show a downward trend, decreasing from 18,769 in January this year to 15,442 in February, 15,972 in March, and 13,077 in April.

Jeonse and monthly rent transactions are also contracting. Seoul apartment jeonse and monthly rent transactions decreased from 15,243 in December last year to 14,971 in January, 13,460 in February, 13,727 in March, and 10,056 in April. This month, the number stands at 6,488, which, if the trend continues, will be less than half compared to the beginning of the year.

There is also a trend of listings being withheld. According to the real estate big data company Asil, apartment listings in Seoul decreased by 3.9% in one month to 83,845 units, while during the same period, Gyeonggi and Incheon saw larger decreases of 4.9% and 7.8%, respectively.

On the other hand, as listings become scarce, Seoul housing prices are on the rise. According to the monthly KB Housing Market Trends data from KB Kookmin Bank’s Liv Real Estate, Seoul housing sale prices rose by 0.80% in May, an increase from the previous month’s 0.74%. Recently, Seoul’s housing price growth rates were ▲1.27% in January, ▲1.14% in February, ▲0.96% in March, and ▲0.74% in April, showing a three-month consecutive decline in growth rate, but ahead of the regulatory implementation, the growth rate is expanding again. Seoul jeonse prices also rose by 0.62% this month, up from 0.56% last month.

The reduction in listings and rise in prices amid transaction contraction appear to be because many multi-homeowners are choosing to gift surplus homes to their children or hold on to them expecting further price increases rather than disposing of them. In fact, according to the monthly apartment transaction status from the Korea Real Estate Board, housing gifts in Seoul last month reached 3,039 cases, marking the highest ever for two consecutive months following 3,022 cases in March.

Professor Daejung Kwon of Myongji University’s Department of Real Estate said, "Contrary to government expectations, multi-homeowners have chosen detours such as gifting, which has only deepened the listing freeze," adding, "With the presidential election next year, expectations for easing regulations on taxes and loans are intertwined, making it more likely that housing prices will show a strong stable trend rather than the government’s desired price stabilization."