Regulation on Multiple Homeowners Causes Balloon Effect... 'Mugap Investment' Surges in Gyeonggi-do Outskirts

Sweeping Up Apartments Under 100 Million KRW Official Price
Exemption from 1.1% Acquisition Tax and Capital Gains Tax Surcharge

View of the Hanam apartment complex area as seen from Namyangju City

Low-priced apartments in eup and myeon areas around the Seoul metropolitan area are attracting strong buying demand. This so-called ‘no-gap investment’ takes advantage of the minimal difference between sale prices and jeonse (long-term deposit lease) prices, allowing for small-scale investments. The balloon effect caused by stringent regulations on multi-homeowners is spreading even to the outskirts of the metropolitan area.

According to the Ministry of Land, Infrastructure and Transport’s real transaction price disclosure system and real estate big data company Asil (Apartment Real Transaction Price) on the 22nd, apartment transactions surged in Anseong-si, Gyeonggi-do in the second quarter of this year. Among the top 10 complexes with the highest transaction volumes in Gyeonggi-do since April, four were located in Anseong-si. During this period, 162 and 160 transactions were recorded at Jueun Pungnim in Yongdu-ri, Gongdo-eup, Anseong, and the nearby Jueun Cheongseol, ranking second and third in transaction volume within Gyeonggi-do. These two complexes are large-scale, with 2,615 and 2,295 households respectively. These complexes, with official prices under 100 million KRW, had monthly sales transactions hovering around 10 units until last year, but recently have seen buying interest from multi-homeowners and corporations.

Local real estate agents explain that no-gap investment is active in these two complexes due to the minimal difference between sale and jeonse prices. From the buyer’s perspective, purchasing with a jeonse lease requires almost no investment capital. For example, a 50㎡ (exclusive area) unit in Jueun Pungnim was leased for 105 million KRW on the 15th of this month, while the sale price was 117 million KRW. This means it is possible to purchase with only 12 million KRW. Jueun Cheongseol shows a similar pattern. A 40㎡ apartment was leased for 80 million KRW on the 16th, and the recent sale price in the same building was 83 million KRW, a difference of only 3 million KRW.

The representative of nearby A Real Estate Agency said, "In previous years, monthly sales transactions were about 5 to 6 units, at most around 10, but this year dozens of contracts are being made each month," adding, "There are many inquiries from multi-homeowners and corporate investors."

Data from the Korea Real Estate Board also supports this trend. In April, corporate apartment sales in Anseong-si reached 76 cases, a 61% increase compared to 47 cases in the same month last year. During the same period, transactions by non-local buyers surged from 69 to 180 cases, an increase of about 160%. A representative from B Real Estate in the area said, "Even though prices that were under 100 million KRW have risen by nearly 30 million KRW in half a year, there are people looking to buy two or three units at once," adding, "Although prices have already risen significantly, there is still demand entering late under the judgment that there is room for further increase."

The industry diagnoses that this buying demand is a balloon effect caused by government regulations on multi-homeowners. Through the July 10 real estate measures last year, the government raised acquisition tax rates up to 12% depending on the number of existing homes owned, but excluded homes with official prices under 100 million KRW from the housing count and applied the basic acquisition tax rate of 1.1% (including special rural tax and local education tax). Eup and myeon areas are also excluded from capital gains tax surcharges.

Seo Jin-hyung, president of the Korea Real Estate Society and professor at Gyeongin Women’s University, said, "As government regulations on multi-homeowners have tightened, investment demand that has nowhere else to go is leading to a balloon effect of gap investments in the outskirts of Gyeonggi-do."

However, there are concerns that investment in low-priced housing could lead to tenant damage. If investment forces suddenly withdraw en masse, it could produce ‘empty shell houses’ where sale prices fall below jeonse prices.

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