Jeon Hye-jin sells Gangnam building for 15 billion won... "Virtually a loss"

Purchased for 14 Billion Won a Year Ago... No Real Profit Considering Taxes
Real Estate as a Celebrity Investment Tool... Cases of Failure Too

Actor Jeon Hye-jin, who purchased a building in Nonhyeon-dong, Gangnam-gu, Seoul for around 14 billion KRW, has been confirmed to have sold the building for 15 billion KRW after just one year.

Actor Jeon Hye-jin. [Photo by NEW]

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system and reports from Maeil Business Newspaper on the 13th, Jeon Hye-jin sold the building located in Nonhyeon-dong, Gangnam-gu, Seoul, which she had purchased under the name of a corporation she represents. The building has one basement floor and eight above-ground floors (land area 238.5㎡, total floor area 1115.48㎡) and was sold last month for 15 billion KRW. It had been purchased for 14 billion KRW in April last year, just over a year ago.

Jeon Hye-jin's building sale is considered very unusual in the real estate industry. Simply comparing the purchase and sale prices suggests a capital gain of 1 billion KRW, but considering corporate tax, capital gains tax, and other factors, the actual profit is expected to be not that large, according to industry speculation. Many evaluations suggest she may have even incurred a loss. The reason for Jeon's sale has not been disclosed.

Jeon Hye-jin and Lee Sun-kyun. Jeon Hye-jin married actor Lee Sun-kyun in 2009 after seven years of dating, and they have two sons.
[Photo by Asia Economy]

The Light and Shadow of Celebrity Real Estate Investment

Ha Ji-won Photo by Yonhap News

Celebrities who hold large amounts of cash often choose real estate investment as a financial strategy.

However, this real estate investment does not always guarantee high returns. While there are successful cases, there are also failures.

A representative failure case is actress Ha Ji-won. Ha Ji-won purchased a building in the center of Seoul for 10 billion KRW, but it is reported that most of the building remains vacant, resulting in losses.

According to the real estate industry in May, Ha Ji-won purchased 'Building 8' located in Seongsu-dong 2-ga in 2020 under the name of her corporation Haewadal Entertainment.

The purchase price at the time was 1.28 billion KRW per 3.3㎡ (pyeong), which is nearly twice the price of a similar nearby building that was traded at 764.9 million KRW per 3.3㎡ in March. However, the building, which consists of one basement floor and eight above-ground floors, is almost entirely vacant except for an optician's shop on the first floor.

According to the real estate registry, the maximum secured claim on the building is 9 billion KRW. Considering that the maximum secured claim is usually set at 120% of the loan amount, the loan is estimated to be about 8 billion KRW, and the monthly interest Ha Ji-won must pay is estimated at 26 million KRW (with an annual interest rate of about 4%).

The industry estimates that considering the poor rental yield and the recent rise in loan interest rates, the annual loss could reach 200 million KRW.

Jung Yong-hwa, leader of the group CNBLUE, also barely made any capital gains from real estate investment.

In 2017, Jung Yong-hwa purchased a building in Cheongdam-dong, Gangnam-gu, Seoul, with two basement floors and four above-ground floors, and a land area of 221.7㎡, for 10.05 billion KRW. Three years later, in October last year, he sold the building for 10.6 billion KRW. The price per 3.3㎡ (1 pyeong) was about 1.58 billion KRW. Jung made a capital gain of 550 million KRW (5.5%) over three years by selling the building.

However, the industry commented that considering acquisition tax, value-added tax, property tax, holding tax, and brokerage fees, the sale was close to breaking even.