Illegal Transactions Surge Including Under-the-Table Deals Amid Pressure to Ban Resale of Pre-Sale Rights

'Unsold Property Graveyard' Pyeongtaek Jije Station The Sharp Central City Premium 150 Million KRW
"Many Buyers Willing to Pay Even with Down Payment Contracts and Transfer Tax Burden"
After August, New Sale Rights Transactions in Seoul Metropolitan Area and Major Cities Blocked
More Investors Seeking Short-Term Gains with Existing Sale Rights

Construction site of 'Jije Station The Sharp Central City' in Segyo-dong, Pyeongtaek City (Photo by POSCO)

[Asia Economy Reporters Onyu Lim, Chunhee Lee] "Even though the contract is underreported and the buyer bears the capital gains tax, there are many people willing to buy. Sellers are withdrawing their listings, expecting prices to rise further." (An official from real estate agency A in Pyeongtaek, Gyeonggi Province)

Since the resale restriction was lifted in April, the pre-sale rights for the 84㎡ apartments at 'Jije Station The Sharp Central City' in Segyo-dong, Pyeongtaek, Gyeonggi Province, recently traded at 580 million KRW. This price includes a premium of 150 million KRW over the original pre-sale price of 430 million KRW. This is a completely different situation from the early pre-sale period when many apartments in the area faced unsold inventory, resulting in so-called 'negative premiums' below the pre-sale price.

According to real estate agencies around Pyeongtaek on the 10th, the existing pre-sale rights prices have skyrocketed due to development prospects such as Samsung Electronics' extreme ultraviolet (EUV) foundry factory investment, combined with the government's ban on pre-sale rights resale. Demand surged after the Ministry of Land, Infrastructure and Transport announced last month that from as early as August, resale of pre-sale rights will be banned in the metropolitan area's overconcentration control zones, growth management zones, and metropolitan city urban areas. Pyeongtaek, a growth management zone, has not been included in the regulated areas until now, allowing pre-sale rights to be bought and sold six months after winning the lottery, but apartments sold after August will have pre-sale rights trading completely banned until move-in.

An official from real estate agency B in Segyo-dong said, "The premium on pre-sale rights has more than doubled in a month," adding, "Many buyers are trying to secure pre-sale rights available for trading for investment purposes." In fact, according to the Gyeonggi real estate portal, the number of pre-sale rights transactions for apartments in Pyeongtaek in May registered so far is 433, an increase of more than 60% compared to 269 transactions in the same period last year.

As demand surges, the brokerage industry reports that sellers are resorting to loopholes and illegal methods to reduce capital gains tax. These include transactions where the buyer bears the seller's capital gains tax and frequent use of so-called down contracts, where the transaction amount is reported lower than the actual price. An official from real estate agency C in the area said, "Although down contracts are clearly illegal, buyers are readily agreeing because listings are scarce."

The value of pre-sale rights is also soaring in provincial metropolitan cities. The 84㎡ pre-sale rights for I-Park City 2nd Complex in Bogyong-dong, Yuseong-gu, Daejeon, set a new record by trading at 903.69 million KRW (12th floor) on the 24th of last month. This is nearly double the general pre-sale price of 500 million KRW. The 84㎡ pre-sale rights for Jeil Punggyeongchae Central Park in Junheung-dong, Buk-gu, Gwangju, which had a pre-sale price of 416 million KRW, also recorded a highest price of 533 million KRW on the 22nd of last month. Additionally, in Incheon’s Bupyeong-gu Sipjeong-dong, the Hillstate Bupyeong, which was pre-sold in March, saw a premium of 10 million KRW on a 59㎡ unit, indicating that demand is concentrating on pre-sale rights in major metropolitan cities ahead of the resale ban.

An industry official said, "The government's regulation-focused policies are causing a balloon effect in the pre-sale rights market as well," and added, "With the market flooded with liquidity due to ultra-low interest rates, it is highly likely that this pattern of regulatory avoidance investment will continue for some time."

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