Golden Holiday Boosts Gangnam Reconstruction Asking Prices... Urgent Sales 'Stop vs Continue'

Golden Holiday Boosts Reconstruction Asking Prices
Eunma Apartment Asking Price Jumps by 50 Million KRW
Potential Decrease in Quick Sales After June
Weak Market Expected Until Year-End Due to Poor Economy

Eunma Apartment (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] With the holding tax imposition date (June 1) just a month away, opinions are divided on whether 'fire-sale' properties with prices lowered by several hundred million won will continue to appear in major reconstruction complexes in Seoul.

Many predict that the real estate market will remain sluggish until the end of this year due to the economic downturn caused by the novel coronavirus disease (COVID-19) and government regulations. However, some believe that since a certain amount of 'ultra-fire-sale' inventory has been exhausted, asking prices will gradually rise again after the holidays.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 3rd, the 84.43㎡ unit (exclusive area) of Eunma Apartment in Daechi-dong, considered the flagship reconstruction complex in Gangnam, Seoul, was traded for 1.95 billion won on the 6th of last month. This is the first time since October last year that a unit of this size was sold in the 1.9 billion won range. Compared to the 2.35 billion won transaction in December last year, the price dropped by about 400 million won.

However, two days later, on the 8th of last month, the actual transaction price for the 84.43㎡ unit rose again to 2.15 billion won. Industry insiders analyzed that the fire-sale properties intended for tax saving purposes might have been exhausted. In fact, the 76.79㎡ units in this complex were mostly priced in the mid-1.7 billion won range until the end of last month but have now risen back to the high 1.7 billion won to low 1.8 billion won range.

This is interpreted as asking prices rising again due to increased purchase inquiries during the golden holiday. An industry official explained, "Although the ruling party's landslide victory in last month's general election worsened the real estate situation in Seoul, the relatively calm COVID-19 situation combined with the holidays has created an atmosphere where asking prices are gradually rising again."

The situation is similar in other reconstruction projects. The flagship reconstruction complex in Songpa-gu, Jamsil Jugong 5 Complex, saw asking prices for the 76.5㎡ units fall to 1.8 billion to 1.82 billion won at the end of last month but have now jumped back to 1.83 billion to 1.9 billion won. The 82㎡ units, which had asking prices dropped to 1.96 billion to 2 billion won, are now priced between 2 billion and 2.05 billion won.

For now, the industry expects fire-sale properties aimed at avoiding holding tax to appear until May. Since the official prices of apartment complexes have risen sharply this year, the burden of property tax and comprehensive real estate tax is likely to increase significantly. According to the Ministry of Land, Infrastructure and Transport, the official price of high-priced homes over 900 million won rose by 21.21% this year.

There is also much analysis that some properties will be listed after June to avoid the heavy capital gains tax. The government does not impose additional capital gains tax on multi-homeowners who transfer homes held for more than 10 years in regulated areas until June 30. Those who sell their homes by July can save tens of millions to hundreds of millions of won in taxes depending on the profit, so it is advantageous for those planning to sell anyway to list their properties during this period.

However, there is also a considerable opinion that after this period, fire-sale properties will disappear, and apartment prices may rebound. The fact that asking prices have already risen since the golden holiday is also expected to support the rise in apartment prices. A representative from a real estate agency in Gangnam-gu said, "There are not many purchase inquiries, but fire-sale properties are also fewer than expected," adding, "Many homeowners have started to hold out."

This content was produced with the assistance of AI translation services.