'Gangnam Bulpae'... Apgujeong Hits 135 Million Won Per Pyeong

Third Sale Transaction After Land Transaction Permission Zone Designation
Hanyang 1st Complex 63㎡ Changes Hands at 2.61 Billion KRW
Demand for 'Smart Single Home' Surges as Multi-Homeowner Restrictions Continue

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] The myth of the 'Gangnam invincibility' in the real estate market remains unbroken. Despite the designation of land transaction permission zones, record-high prices for apartments in Apgujeong continue, with contracts reaching up to 130 million KRW per pyeong. As the government tightens regulations on multi-homeowners, preference for a 'smart single home' is increasing, causing Gangnam housing prices to rise further.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 5th, a 63.87㎡ (exclusive area) unit in Hanyang 1st Apartment, Apgujeong-dong, Gangnam-gu, Seoul, changed hands for 2.61 billion KRW on the 19th of last month. This apartment was traded for 2.35 billion KRW in January, marking a 260 million KRW increase in half a year. The price per 3.3㎡ (1 pyeong) reached an astonishing 134.88 million KRW.

This contract is the third sale since Apgujeong-dong was designated as a land transaction permission zone at the end of April. Unlike Mok-dong in Yangcheon-gu and Yeouido-dong in Yeongdeungpo-gu, which are also land transaction permission zones and show a mix of record and non-record prices, Apgujeong-dong continues its streak of record-high prices. Last month, a 210.1㎡ unit in Hanyang 8th Apartment was sold for 6.6 billion KRW, which is 1.82 billion KRW higher than the actual transaction price of 4.78 billion KRW a year ago. In June, a 105㎡ unit in Hyundai 13th Apartment was also contracted at 3.7 billion KRW, 750 million KRW higher than the previous high of 2.95 billion KRW.

Despite deploying the land transaction permission system, a last resort to stabilize the real estate market, housing prices continue to soar. In fact, since the beginning of this year, contracts for apartments priced over 100 million KRW per 3.3㎡ have been continuously made, mainly in Gangnam and Seocho districts. According to real estate research firm Real Today, there were a total of 568 apartment transactions in Seoul in the first half of the year priced over 100 million KRW per 3.3㎡, already reaching 70% of last year's total transactions (804 cases).

Experts analyze that the government's regulations aimed at curbing Gangnam housing prices have instead backfired. As capital gains tax rates and comprehensive real estate tax rates for multi-homeowners were significantly increased, demand concentrated on a 'smart single home,' sustaining the Gangnam invincibility myth. With sluggish urban supply, the scarcity of redevelopment projects is becoming increasingly pronounced.

Recently, the Democratic Party of Korea announced through the 'Partial Amendment to the Income Tax Act' that it will further strengthen regulations on multi-homeowners. To receive long-term holding special deductions on capital gains tax, multi-homeowners will be required to meet not only disposal but also holding and residence conditions. The ruling party is expected to encourage multi-homeowners to sell their homes by providing a grace period for the enforcement of these regulations.

However, concerns are emerging in the market that "the side effects may outweigh the intended policy effects." As preference for a 'smart single home' grows, polarization between popular areas in Seoul and the outskirts of the metropolitan area and provinces may worsen. Professor Shim Gyo-eon of Konkuk University's Department of Real Estate stated, "Multi-homeowners will likely dispose of cheaper homes first and keep high-priced homes in Gangnam to maximize tax benefits," adding, "If real estate policies are issued repeatedly in a short period, market confusion is inevitable."