One month after the Aug. 3 tax overhaul was announced, Seoul's apartment market has split along clear lines. Gangnam-area districts, where concerns over heavier property holding taxes have grown, have seen prices correct, while non-Gangnam districts with homes in price ranges accessible to owner-occupier buyers have extended their gains, keeping citywide prices on an upward path. With the government recently easing parts of the tax plan, selling pressure on high-priced Gangnam apartments has eased somewhat, and prices are expected to keep rising.
According to the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 3rd, a 161-square-meter unit at Hanyang 3rd in Apgujeong-dong, Gangnam-gu, sold for 7.5 billion won in July but changed hands for 6.85 billion won on the 20th of last month, a drop of 650 million won in one month. By contrast, an 84-square-meter unit at Daewoo in Ui-dong, Gangbuk-gu, rose from 660 million won on the 11th of last month to 755 million won on the 26th, a gain of 95 million won in about two weeks. A 78-square-meter unit at Samsung Raemian in Guro-gu also climbed from 980 million won to 1.08 billion won, up 100 million won in a month.
An official at a Guro-gu brokerage said only four units are listed for sale in a complex of more than 1,000 households, and asking prices run 100 million to 200 million won above recorded sale prices. "There are so few jeonse listings that people are waiting to be shown units as soon as they come on the market," the official said, referring to a lump-sum deposit lease. The official added that districts in Seoul's southwest, including Guro-gu, have seen almost no impact from the tax overhaul and little effect from lending rules, and that prices there will keep rising.
The gap between districts also shows up in Korea Real Estate Board data. In the weekly apartment price survey for the fifth week of August, as of the 31st, Gangnam-gu apartment prices fell 0.41% from the prior week. Prices rose 0.01% in the first week of August but then posted declines of 0.02%, 0.05% and 0.11%, widening the drop. Seocho-gu also swung from a 0.02% gain to a 0.23% decline over the same period, while Songpa-gu's increase narrowed from 0.15% to 0.01%. As a result, the southeastern zone, which includes the four Gangnam districts, flipped from a 0.09% gain in the first week of August to a 0.12% decline this week.
By contrast, the 14 districts north of the Han River averaged a 0.36% gain this week, four times the 0.09% average for the 11 districts to the south. Seongbuk-gu rose 0.54%, Jungnang-gu 0.52%, Nowon-gu 0.50%, Gangbuk-gu and Gangseo-gu 0.45% each, and Gwanak-gu 0.43%, all far above the citywide average. Analysts say that as tax burdens rise mainly on expensive homes, owner-occupier demand has shifted to relatively cheaper areas, accelerating a catch-up in prices.
Buying interest and price gains for ultra-high-end homes have slowed, but wider increases outside Gangnam kept citywide prices climbing. Seoul apartment sale prices rose 0.22% from the previous week. After a 0.26% gain in the first week of August, the city has held to increases in the 0.2% range.
The variable that will determine where Seoul prices go next is whether the tax plan is revised further. The government softened parts of the original proposal during Cabinet deliberations, leaving selling pressure on Gangnam homeowners weaker than initially expected. Still, the prevailing view is that an immediate price rebound is unlikely, because the main provisions that determine actual tax bills remain in place, including a new cap on comprehensive real estate tax credits, differentiated credit rates based on length of residence and ownership, and a ceiling on the long-term residence income deduction.
Nam Hyuk-woo, a researcher at Woori Bank's real estate research institute, said, "Parts of the tax plan were eased, but the core factors that determine the actual tax burden remain, so slowing transactions and soft prices in the Gangnam area could continue for some time." The researcher added, "Because purchases in Seoul's mid- and lower-priced districts are driven mainly by owner-occupier buyers who do not own a home, the current decoupling pattern could persist."
