Let's Find a 'Smart Single House'?Provincial Apartment Market Shaken

Concerns Over Concentrated Investment in Seoul Due to Equalized Regulations Between Provinces and the Capital Region
Value of Pre-sale Rights in Cheongju and Other Areas Inflated by Capital Region Regulations Plummets

[Image source=Yonhap News]

[Asia Economy Reporter Onyu Lim] As nationwide real estate regulations have been strengthened through the June 17 and July 10 measures, the local housing market is rapidly freezing. Investors who had flocked to local areas due to the balloon effect of regulations in Seoul and the metropolitan area are now leaving in search of a smart single property as regulations have been equalized. There are complaints that "tying the metropolitan area and local areas under the same regulations is reverse discrimination against local areas."

According to the real estate industry on the 19th, the premium on the pre-sale rights of L Apartment, 84㎡ (exclusive area) in Mochung-dong, Seowon-gu, Cheongju, which was around 70 million KRW in April this year, has now dropped to the 30 million KRW range. The first floor is around 15 million KRW. Until last year, this apartment, which had been struggling with unsold units, experienced a rollercoaster ride as investments from outsiders increased due to the balloon effect caused by strengthened regulations in the metropolitan area. However, recently, buying demand has sharply cooled again.

The background behind the freezing of the local pre-sale rights market is the strengthening of loan regulations combined with the increase in capital gains tax rates through the July 10 measures. The current capital gains tax rate on pre-sale rights is 6-50% depending on the period in non-regulated areas, and 50% regardless of the period in regulated areas. However, under the new measures, regardless of regulation, a 70% tax rate applies for holding periods under one year, and 60% for one year or more. This has eliminated the space for so-called "short-term traders" aiming for quick profits.

In areas such as Gimhae and Geoje in Gyeongnam, and Gumi in Gyeongbuk, zero premiums are reportedly appearing frequently. The pre-sale rights for K Apartment, 59㎡ in Samgye-dong, Gimhae, which had premiums exceeding 30 million KRW, are now available for sale at prices close to the pre-sale price after the July 10 measures. Pre-sale rights with premiums under 5 million KRW can also be easily found. A representative from B real estate agency in the area said, "An apartment that was traded at around 270 million KRW earlier this month has now dropped to around 230 million KRW." The premium on the pre-sale rights for K Apartment, 59㎡ in Jangpyeong-dong, Geoje, also fell from 45 million KRW at the end of last month to 25 million KRW currently.

As gap investment, which had supported local apartment prices along with pre-sale rights, becomes difficult, actual transaction prices of apartments in small and medium-sized local cities are also noticeably declining. The acquisition tax rate for owners of two or more houses has risen to 8-12%, leading to an increase in those putting local apartments on the market. A 73.4㎡ apartment in Donghoe-dong, Donghae, was sold for 95 million KRW on the 15th. Compared to a transaction price of 115 million KRW a month ago, its value has dropped by 20 million KRW.

With nationwide regulation equalization intensifying the demand for a smart single property, difficulties in the local pre-sale rights and apartment markets are expected to worsen. A real estate industry official said, "Recently, consultations related to sales by those who made short-term investments in local areas have been increasing," adding, "As local regulations are strengthened similarly to the metropolitan area, investment is likely to concentrate back in Seoul."

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