Pre-sale and Occupancy Rights 'Tax-saving Properties' Flood the Market

Recognition of Move-in Rights as Housing Units
Disposal to Avoid Transfer Tax Increase
Seoul Move-in Rights Transactions
Highest at 123 Cases in June
Active Deals Including Hillstate Sinchon

Sharp Rise in Pre-sale Rights Resale in Provinces
High at 15,728 Cases in June
Last-minute Rush Before Regulation Tightening

[Asia Economy Reporter Choi Dong-hyun] Due to the demand for new apartments and the government's strengthened tax burden on multi-homeowners, transactions of redevelopment and reconstruction association members' move-in rights in Seoul have surged sharply. Along with this, in major provincial cities, transactions of existing apartment pre-sale rights are also active ahead of the full ban on pre-sale right transfers scheduled for mid-next month. Experts predict that demand will also flock to the pre-sale rights market in smaller provincial cities where regulations are less strict.

According to the Seoul Real Estate Information Plaza on the 19th, the number of move-in right transactions in Seoul in June reached 123, marking the highest this year. As of this day, July transactions have already reached 77. Since the transaction reporting deadline is at the end of this month, the total number of move-in right transactions in July is also likely to exceed 100. Considering the average monthly transaction volume of 53 from January to May, the number of move-in right transactions has more than doubled since June.

Move-in rights are the rights for association members within redevelopment and reconstruction zones to move into new homes. Although pre-sale rights differ in that they arise when a general pre-sale winner of an apartment pays a deposit, both grant eligibility to move into a new apartment. In Seoul, which is designated as a speculative overheating district, the transfer of pre-sale rights is prohibited, increasing buyers' interest in move-in rights. Additionally, since move-in rights are recognized as part of the housing count, some association members are rushing to sell their properties to avoid capital gains tax and other tax burdens, leading to increased transactions.

In the case of "Hillstate Sinchon" in Bukahyeon-dong, Seodaemun-gu, which began move-ins earlier this month, 11 move-in right transactions took place last month alone. For "Hillstate Classian" in Singil-dong, Yeongdeungpo-gu, scheduled for move-in in October, 4 transactions occurred between July and August. Similarly, for "Mapo Prestige Xi" in Yeomni-dong, Mapo-gu, scheduled for move-in in March next year, 7 association member move-in rights changed owners last month. Currently, the sale price of an 84㎡ (exclusive area) move-in right in this apartment is 1.69 billion KRW, about 800 million KRW higher than the general pre-sale price (approximately 900 million KRW).

Demand for new apartments in Seoul is expected to increase further. The number of apartment move-ins in Seoul next year is projected to be 36,000 units, a 32% decrease from this year's 53,000 units. Moreover, under the June 17 real estate measures, to qualify for capital gains tax exemption on move-in right transfers, owners must reside for more than two years. This inevitably reduces the number of properties available on the market.

Meanwhile, in the provinces, pre-sale right transactions are rapidly increasing. According to the Korea Real Estate Agency's "Nationwide Apartment Transaction Status by Transaction Cause," 15,728 pre-sale right transfers occurred in June. This is a 130% increase compared to the same period last year (6,847 cases), marking the highest since January 2018 (15,978 cases). Combining the second quarter, 34,077 pre-sale right transactions took place, with Chungnam and Chungbuk showing the highest year-on-year increases at 402% and 223%, respectively.

This surge in pre-sale right transactions is interpreted as buyers trying to catch the last train before the tightening of pre-sale right transfer restrictions in metropolitan cities of the provinces starting mid-September. Currently, houses supplied in private land areas in the metropolitan area and provincial metropolitan cities, which are not regulated areas, are subject to a six-month transfer restriction period, but with the upcoming regulation strengthening, transfers will be prohibited until ownership registration.

Experts expect that demand will shift to smaller provincial cities where regulations are relatively less strict. Jang Jae-hyun, Research Team Leader at RealToday, said, "Due to the pre-sale right transfer restrictions and the increased tax burden on multi-homeowners, in the short term, demand will flock to smaller provincial cities that are free from regulations."

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