Regulations Loom for Speculative Single-Home Owners
Target Expands Beyond Gangnam
President Lee Jaemyung posted a message on his social media on February 26, following statistics showing price declines centered in Seoul’s Gangnam and Yongsan districts, making a pointed reference to investment and speculative single-home owners. As pressure on multi-home owners has led to more listings and, in turn, the first decline in real estate prices in two years, the administration has begun to directly target “non-resident single-home owners.” President Lee reiterated his commitment to “creating a situation in which even single-home owners with speculative intent will find it more advantageous to sell than to hold,” leading to expectations that listings in Seoul and its surrounding areas will accelerate further.
The recent drop in apartment prices in Seoul’s major districts, including the three Gangnam districts, has become increasingly pronounced. According to the real estate industry on February 27, a 74-square-meter B-type apartment in Raemian Leaders One in Banpo-dong, Seocho-gu, was listed for KRW 3.45 billion on the previous day, February 26. Given that a 59-square-meter unit in the same complex is currently listed at KRW 3.5 billion, this is highly unusual. With similar-sized units generally being listed for between KRW 3.6 billion and KRW 3.8 billion, this constitutes an “urgent sale” priced over KRW 200 million lower. Another 74-square-meter A-type unit had its asking price cut by KRW 100 million just a day after being listed on February 25. A local real estate agent explained, “Sellers need to find buyers before April 10,” adding, “Urgent sale listings are quickly increasing among multi-home owners.”
The same trend can be observed in the Apgujeong redevelopment district. An 111-square-meter B-type unit in Hyundai 8th Complex, Building 91, Apgujeong-dong, was listed for KRW 5.8 billion on February 12, only to have its asking price reduced by KRW 300 million after 13 days. This is a significant drop considering previous transactions had reached KRW 6.2 billion. Similarly, a 38-square-meter C-type unit in Helio City, Songpa-gu, was listed for KRW 2.1 billion on February 10, but saw a KRW 150 million price drop after just three days.
President Lee’s focus on non-resident single-home owners appears to be aimed at maintaining the trend of increasing listings as multi-home owners continue to sell. According to big data real estate firm Asil, as of February 25, the number of apartment listings in Gangnam-gu stood at 9,263, up approximately 2,000 (21.9%) from 7,256 on January 22, the day the government officially announced the end of the capital gains tax reduction grace period.
In contrast, transaction volume has plummeted. According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system, there were only 345 apartment transactions in the three Gangnam districts and Yongsan-gu over the past month, from January 26 to the present. This represents a decline of more than 80% compared to the same period last year (1,886 cases). Even accounting for the usual time lag in registration, the overall trend is unmistakably one of shrinking transactions. Comparing Seoul as a whole during the same period, total transactions dropped from 6,307 to 3,432-a decrease of about 46%. The decline is especially stark in the three Gangnam districts and Yongsan-gu. Since the Gangnam districts have typically led the upward trend in Seoul’s apartment prices, these declines are expected to affect other districts within the Hangang Belt as well.
Apartment complexes densely fill various parts of the city as seen from the Namsan Observatory in Seoul. Photo by Yonhap News Agency
President Lee announced that he would employ all available policies targeting investment and speculative single-home owners. The anticipated increase in tax burdens is expected to far exceed previous estimates. When capital gains taxes are applied at increased rates, up to 82.5% of the profit can be levied as tax, but the president intends to raise the “holding cost”-that is, the property tax-even further. For example, a three-home owner with Eunma Apartment who has held it for 10 years and realized a profit of about KRW 1.6 billion would face a tax burden of KRW 1.1 to 1.3 billion after the capital gains tax hike. If the combined publicly assessed value of the three properties is about KRW 5 billion, the property tax alone would exceed KRW 100 million. Taking maintenance costs into account, if the annual home price increase is around 3%, owners may still opt to hold rather than sell.
In particular, the deduction applied in the calculation of capital gains tax for holding or residing in a property may be reduced or eliminated for holding, making it likely that single-home owners will either move into the property themselves or decide to sell.
Park Wongap, Senior Real Estate Expert at KB Kookmin Bank, commented, “Investment-oriented non-resident single-home owners may not account for a large share of the market, but there is a possibility that the deemed rental income tax (a tax on interest-equivalent amounts of jeonse deposits) that was expanded to two homes this year could be further extended to single-home owners.” He added, “If measures to reduce tax deduction benefits are finalized, calculations will become much more complicated for those affected, whether they choose to sell or reside.”
There are also projections that the price decline could accelerate in these regions as May approaches. Kwon Youngsun, Team Leader at Shinhan Bank Real Estate Investment Advisory Center, noted, “There are still about two months left before the capital gains tax hike takes effect, and some owners are planning to sell gradually. However, if supply increases sharply in a short period, the magnitude of the price decline could deepen.”
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