"Gangnam Sentiment Has Shifted"...Even With Multi-Homeowners' Urgent Sales, Buyers Are Waiting For 'Further Drops' [Real Estate AtoZ]

More tax-driven listings push down asking and transaction prices
Songpa apartment listings jump 40% in just one month

A view of densely packed apartment buildings in Seoul. Yonhap News

In Seoul's Gangnam area, apartment sales that have lowered their prices by tens of millions of won within about a month are increasingly being reported. As listings have grown ahead of the reinstatement of heavy capital gains tax in May and asking prices have clearly begun to fall, there are now cases being reported at prices below previous transaction levels.

At the same time, there are still not-infrequent cases of new record-high transaction prices above previous peaks. For apartment transactions in Seoul, there is a time lag between when the parties agree on terms and when the deal is actually closed and reported. With about a month having passed since President Lee Jaemyung pledged to bring back the heavy capital gains tax, attention is focusing on whether apartment prices in the Gangnam area, which had driven the rise in Seoul home prices, will now turn downward.

According to the actual transaction price disclosure system of the Ministry of Land, Infrastructure and Transport on the 24th, an 84-square-meter exclusive-use unit at Kyungnam Honoursville in Yeoksam-dong, Gangnam-gu, Seoul, was traded for 1.5 billion won on the 13th of this month. Compared with the previous peak price of 1.6 billion won in December last year, it was sold for 100 million won less. An 84-square-meter exclusive-use unit at Parkrio in Sincheon-dong, Songpa-gu, also appeared in the transaction records on the 12th of this month at 2.98 billion won, down 70 million won from last month’s highest actual transaction price of 3.05 billion won.

President Lee has been repeatedly stressing his intention to roll back the benefits that multi-homeowners have enjoyed and to increase their "cost of holding out." In this environment, urgent listings aimed at tax savings are coming onto the market, creating a situation in which apartment prices, especially in the Gangnam area, appear to be losing momentum.

Data from the Korea Real Estate Board show that in the third week of February (as of the 16th), apartment prices in Gangnam-gu rose 0.01% from the previous week, effectively flat. A week earlier, they had risen 0.02%. Seocho-gu also rose 0.05%, but the pace slowed compared with the 0.13% increase in the previous week. Songpa-gu had climbed 0.09% in the previous week, but in the third week the increase narrowed to 0.06%.

On the 22nd, apartment listings marked as urgent sale and super-urgent sale were posted at a real estate agency in Gangnam District, Seoul. Yonhap

This is far below the overall 0.15% increase in apartment prices across Seoul. Considering that the three Gangnam districts had previously led the overall uptrend in Seoul, this marks a clear shift in sentiment. According to Korea Real Estate Board data, the apartment sales price index for Gangnam-gu had been rising steadily from mid-March 2024 until recently.

An 84-square-meter exclusive-use unit at Gaepo Xi Residence in Gaepo-dong, Gangnam-gu, was actually traded for 4.27 billion won in December last year, but as of the previous day there was a listing on the market for 3.7 billion won labeled as an "urgent sale by a multi-homeowner." A listing for the same-sized unit at 3.75 billion won carried the description "multi-homeowner, prime building and floor." A nearby certified real estate agent A said, "Multi-homeowners are putting properties on the market after cutting their asking prices by hundreds of millions of won, but actual deals have not yet taken place," adding, "About 90% of potential buyers are just watching, expecting asking prices to fall further."

On top of listings aimed at avoiding the heavy capital gains tax, more apartments are coming onto the market in anticipation that, after the June local elections, property tax reform and cuts to the special long-term holding deduction will begin in earnest, and these units are now waiting for buyers. According to real estate big data firm Asil, as of the previous day there were 4,922 apartment sale listings in Songpa-gu, up about 40% from 3,526 during the same period a month earlier. Listings also increased by 50% in Seongdong-gu, 22% in Seocho-gu, and 16% in Gangnam-gu.

Kwon Youngseon, team leader at Shinhan Bank’s Real Estate Investment Advisory Center, said, "We expect that multi-homeowners’ properties will come onto the market until May 9, when the temporary suspension of the heavy capital gains tax ends, leading to price declines and more listings," but added, "Even if real estate prices in the three Gangnam districts do turn downward, the drop is unlikely to be large, because it will not be that all Gangnam homes are put on the market, but only a portion of listings from multi-homeowners that will actually appear."

He went on to say, "Rather than apartment prices in the three Gangnam districts falling and other areas following suit, there is a possibility that overall real estate prices will undergo an adjustment as listings emerge in areas where multi-homeowners are trying to sell their homes first."