Apartment Price Increase Temporarily Pauses... Focus on 'Turning Point' in First Half of the Year

Seoul and Capital Area Housing Prices Temporarily Slow Down
KB Real Estate Nationwide Buyer Dominance Index Below 100
Market Expected to See 종부세 Avoidance Listings in March-April
New Public Land Candidates to Be Announced in First Half of Year

[Asia Economy Reporter Moon Jiwon] Since the announcement of the February 4 housing supply plan, the rate of apartment price increases nationwide, including Seoul, has slowed, focusing market attention on March and April. This is because there is a high possibility that last-minute listings from multi-homeowners trying to avoid the upcoming comprehensive real estate tax imposition and capital gains tax surcharges will flood the market during this period.

Moreover, with the government's announcement of new public housing sites in the metropolitan area, as promised in the February 4 supply plan, overlapping, the spring housing market is expected to become a crucial turning point that will determine the medium- to long-term trend of housing prices.

Will Large-Scale New Housing Site Purchases Calm Down?

According to the weekly apartment price trends from the Korea Real Estate Board, as of the 15th, the apartment price increase rate in Seoul recorded 0.08%, reducing the growth rate for two consecutive weeks since the first week of this month (0.10%). Outside Seoul, the increase rates also shrank in most regions nationwide, including the metropolitan area (0.33% → 0.30%) and provinces (0.22% → 0.20%).

KB Real Estate Live On's buyer dominance index also fell below 100 this week, recording 98.7. This indicates that the number of sellers has increased compared to buyers.

The government expects this trend to strengthen further as the designation process for new public housing sites under the February 4 plan continues. The Ministry of Land, Infrastructure and Transport plans to announce the first batch of new public housing site candidates, totaling about 250,000 households, as early as the end of this month or early next month. The new sites near the metropolitan area are nearly equivalent in size to the entire area of the 3rd New Town development.

In July, announcements of public development project candidate sites within downtown Seoul (43,500 households) will follow. An industry insider commented, "The 'quality' of the newly announced housing sites is as important as the 'quantity.' If the location falls short of expectations, it could have a counterproductive effect."

June Comprehensive Real Estate Tax ‘Bomb’... Capital Gains Tax Burden Also at Record High

Ahead of the June comprehensive real estate tax imposition date, there is also a possibility that multi-homeowners will flood the market with tax-avoidance listings. An industry insider explained, "Multi-homeowners who feel the burden of the comprehensive real estate tax will likely put their properties on the market around March to April," adding, "This could become a short-term variable affecting housing prices."

In fact, the market expects this year's comprehensive real estate tax burden to be significantly higher compared to previous years. Following the government's announcement of the official price realization roadmap in November last year, the official prices of high-priced homes have risen sharply, and from this year, the comprehensive real estate tax rate has increased up to 6%.

The increased capital gains tax burden when selling homes is also expected to impact buying demand. The highest capital gains tax rate rose from 42% to 45% starting this year. Additionally, from June, the capital gains tax surcharge rates will also be raised. Currently, multi-homeowners selling homes in regulated areas face an additional 10 percentage points for two-homeowners and 20 percentage points for those owning three or more homes on top of the basic capital gains tax rate. Going forward, these surcharges will increase to 20 percentage points and 30 percentage points, respectively.

When combining the highest basic tax rate (45%) with the highest surcharge rate (30 percentage points), the maximum tax rate can reach up to 75%, leading to opinions that this constitutes a ‘punitive tax.’

However, despite various variables, experts believe the possibility of a reversal to a downward trend in housing prices remains low.

Professor Kwon Daejung of Myongji University analyzed, "Due to strong government regulations, transactions will shrink, but prices are likely to continue reaching new highs," adding, "With a shortage of new supply and increasing waiting demand, jeonse (long-term lease) prices will rise, which can also push up sale prices."

Ko Jongwan, head of the Korea Asset Management Research Institute, also explained, "Jeonse prices are expected to rise about 5% and sales prices about 3% this year," but added, "Overall, after reaching a peak this year, a turning point may come."

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