As Tax Burden Increases... Corporations 'Sell', Multi-Homeowners 'Gift'

Last Month's Corporate Apartment Sales Highest This Year
Tax Burden Increases, Prompting Quick Sales... Regulation Effects
Multi-Homeowners Prefer Gifts Over Sales... "Prices Will Rise More"
Regulations Only Half Effective... Where Are Seoul Housing Prices Headed?

[Asia Economy Reporter Moon Jiwon] As the government significantly tightened real estate-related regulations, corporations facing increased tax burdens disposed of a large number of apartments, while multi-homeowners chose gifting over selling. Experts predict that amid ongoing market confusion caused by successive regulations, the tug-of-war between sellers and buyers will continue, maintaining a slightly weak market trend until the end of this year.

According to the Korea Real Estate Board on the 21st, the total number of apartment sales by corporations nationwide last month was 8,278. This is the highest transaction volume this year, representing a 33.7% increase compared to the previous month (6,193). The number of apartment sales by corporations has been on the rise, with 3,370 in January, 3,251 in February, 4,317 in March, 4,219 in April, 4,935 in May, and 6,193 in June.

In particular, in Seoul, the number of apartments sold by corporations to individuals increased nearly threefold from 110 in June to 303 last month. The surge in corporate listings in a short period is due to the government significantly increasing the tax burden on corporations through the June 17 measures. Corporations were criticized as the main culprits driving up housing prices in regulatory blind spots by purchasing large numbers of apartments in places like Cheongju and Seoul during this year's price rise.

From June next year, the comprehensive real estate tax rate for corporations will increase to 3% for up to two houses, and 4% for three or more houses or two houses in regulated areas. The existing 600 million KRW deduction on the comprehensive real estate tax will also be abolished, significantly increasing holding tax burdens. From January next year, the capital gains tax rate imposed on corporations when disposing of houses will be additionally increased by 10% on top of the basic 10-25% rate.

The increase in corporate listings indicates that the government's policy is effective. As the number of properties available in the market increases, the likelihood of blocking price rises also increases.

However, multi-homeowners appear to be choosing gifting over selling despite the regulations. Since housing prices are expected to rise in the long term, they intend to reduce immediate tax burdens by gifting to their children and benefit from future capital gains.

According to Korea Real Estate Board statistics, the number of apartment gifts nationwide last month was 14,153, 2.3 times the previous month’s 6,133. This is the first time nationwide gift transactions exceeded 10,000. In Seoul, the number doubled to 3,362 in just one month. Nowon-gu had the highest number with 407, followed by Songpa-gu (405), Yangcheon-gu (336), Gangnam-gu (282), and Yongsan-gu (229).

This is also interpreted as an effect of the government’s recent significant increases in comprehensive real estate tax rates and capital gains tax rates for multi-homeowners. Choosing gifting over selling to others reflects the judgment that there is still room for future housing price increases. Ahn Myung-sook, head of the Real Estate Advisory Center at Woori Bank, said, "If the sentiment spreads that housing prices can no longer rise, urgent sale listings will appear, but for now, it seems there is still a belief that prices can go higher."

In fact, apartment purchases by people in their 30s in Seoul continued. They purchased 5,345 apartments in Seoul last month, accounting for 33.4% of the total Seoul transactions (16,002). This is the highest proportion among all age groups. Since it is difficult to secure housing through pre-sale due to low subscription scores, and rising jeonse (long-term deposit lease) prices have made housing unstable, they are taking out as much loans as possible to buy their own homes.

Experts expect housing prices to maintain a slightly weak trend for the time being. Kwon Il, head of the Research Team at Real Estate Info, said, "Since prices have risen a lot so far, the rate of increase is slowing down," but added, "Many multi-homeowners still believe prices will rise despite tax hikes, so it seems difficult for housing prices to turn negative."

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