The Local Pre-sale Market Swept by 'Danta-jok'... Zero Premiums Abound

Housing Prices in the Seoul Metropolitan Area Soared Due to Balloon Effect Amid Tightened Regulations
Regulatory Zones Expanded by the June 17 Measures
Stronger Capital Gains Tax on Pre-Sale Rights with July 10 Measures
Investment from Outsiders in Incheon, Cheongju Drops Sharply
"Transactions Frozen, Prices May Fall Further"

#Until last year, L Apartment in Mochung-dong, Seowon-gu, Cheongju-si, Chungbuk, which was struggling with a large number of unsold units, saw the premium on the 84㎡ (exclusive area) pre-sale rights soar to 70 million KRW in April this year. This was due to a balloon effect caused by the government's strengthened regulations on the metropolitan housing market, attracting outside investors. The selection of this area as the site for a synchrotron accelerator also contributed to the price increase. However, recently, the premium on this apartment has halved, causing the price to ride a rollercoaster within a few months. The premium on first-floor ultra-low-priced pre-sale rights has dropped to 15 million KRW. This is because the government issued consecutive real estate measures on June 17 and July 10, which sharply cooled the buying demand.

According to frontline real estate brokerage firms on the 16th, the pre-sale rights market for apartments in Incheon and provincial areas is rapidly freezing due to the government's successive high-intensity measures. The June 17 measure, which expanded regulated areas to most parts of the metropolitan area and provinces, and the July 10 measure, which imposed punitive taxation on multi-homeowners, caused outside investors seeking short-term price gains to stop coming.

In particular, Cheongju and Incheon, which were designated as adjustment target areas and speculative overheating districts by the June 17 measure after a surge in house prices due to a large influx of outside investors, have been hit hard. The premium on the 84㎡ pre-sale rights of H Apartment in Geomdan New Town, Incheon, rose to 130 million KRW in early last month but has now fallen below 100 million KRW. A representative from A Real Estate Agency in Geomdan New Town explained, "The value of pre-sale rights surged as outside investors came in, but inquiries stopped after the area was designated as a regulated zone."

Provincial small and medium-sized cities have been hit even harder. In places like Gimhae and Geoje in Gyeongnam and Gumi in Gyeongbuk, zero premiums have been reported. The 59㎡ pre-sale rights of K Apartment in Samgye-dong, Gimhae, which had a premium exceeding 30 million KRW, have been available for sale at the pre-sale price level after the July 10 measure. Pre-sale rights with premiums below 5 million KRW can also be easily found. A representative from B Real Estate in the area said, "An apartment that traded at around 270 million KRW earlier this month has now dropped to around 230 million KRW." The premium on the 59㎡ pre-sale rights of K Apartment in Jangpyeong-dong, Geoje, also fell from 45 million KRW at the end of last month to 25 million KRW currently.

The background for the freezing of the provincial pre-sale rights market is the combination of strengthened loan regulations and the increase in capital gains tax rates under the July 10 measure. The current capital gains tax rate on pre-sale rights is 6-50% depending on the holding period in non-regulated areas and 50% regardless of the period in adjustment target areas. However, under the new measures, a 70% tax rate applies for holdings under one year and 60% for holdings over one year, regardless of regulation status. This has eliminated the space for so-called 'short-term traders' seeking quick profits.

Some predict that the pre-sale rights trading market itself will become almost meaningless. Starting next month, the resale restriction period in the metropolitan area and provincial metropolitan cities will be strengthened from the current six months to until the ownership transfer registration.

According to the Korea Housing Industry Association, the nationwide Housing Sales Sentiment Index (HSSI) forecast for this month recorded 69.1, down 10.5 points from June. Especially in regulated areas such as Incheon (75.6, down 15.5 points), Gyeonggi (78.9, down 12.0 points), Daejeon (62.5, down 19.3 points), and Chungbuk (53.3, down 20.0 points), perceptions of the conditions for housing sales projects worsened. Kim Deok-rye, head of the Housing Policy Research Office at the Korea Housing Industry Association, analyzed, "Due to successive measures expanding regulated areas and strengthening regulations on jeonse loans and moving-in obligations, the perception that the housing sales market will not be good has spread."

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