[Initial Insight] Will the Real Estate 'Jonbeojok' Win?

[Image source=Yonhap News]

[Asia Economy Reporter Jo Gang-wook] There are cautious whispers that the turning point in the real estate market, which had been soaring endlessly, has begun. As housing demand rapidly shrinks, especially in the outskirts of Seoul, and the pace of house price increases slows down, the government’s persistent claim of a housing price peak seems to be gaining traction. However, it is still difficult to hastily conclude whether the market has truly reached a turning point. While everyone acknowledges the growing fatigue over the current rapid rise in housing prices, the situation of widespread supply shortages remains unchanged.

The term ‘Jonbeo’ (a slang meaning ‘to endure until the end’) is now commonly used, but its origin dates back to late 2017 during the Bitcoin craze. At that time, Bitcoin surged to $20,000 but crashed to around $3,200 by the end of 2018, causing shock. Nevertheless, a group called the ‘Jonbeo tribe’ emerged, insisting that prices would rise again. Eventually, Bitcoin climbed to around $60,000, giving rise to the slogan ‘Jonbeo wins.’

Recently, similar slogans have appeared in the real estate market. Unlike retail investors in the Bitcoin market who believe and wait for prices to rise until the end, in the real estate market, it is mainly multi-homeowners and those owning high-priced homes in the Gangnam area who are holding out. They expect that the strengthened tax regulations introduced by the current government, such as comprehensive real estate tax and capital gains tax, will eventually be eased, so they are literally ‘enduring’ by holding onto their properties. This is the exact opposite of the expected effect when the government announced various regulations, anticipating that multi-homeowners would put their properties on the market and stabilize housing prices.

So, are these owners ignoring the heavy tax burdens and simply continuing to hold? The market believes that multi-homeowners who own several high-priced or ultra-high-priced apartments valued around 2 billion KRW have mostly completed their asset portfolio adjustments. To reduce the comprehensive real estate tax burden, they have changed ownership to joint names (or converted jointly owned multi-homes into single ownership under one person’s name) and gifted properties to their children. Most properties that needed to be disposed of have been handled, and apartments registered as rental businesses have been decided to be held continuously until automatic cancellation. In fact, from January to August this year, the number of apartment gifts nationwide reached 58,298, accounting for 6.8% of all transactions, the highest ratio since related statistics began in 2006. This supports the claim that they chose to endure (‘Jonbeo’) because they judged that capital gains exceed the comprehensive real estate tax burden.

However, there are also those who have no choice but to endure despite the heavy tax burden: high-priced single-homeowners. Although they worry about the increased taxes due to the double-digit gains in housing prices within a year, selling and moving is blocked by the increased capital gains tax burden. Their argument is, “I worked my whole life to buy one house; is it my fault that house prices have risen so sharply?”

The biggest recent focus in the real estate market is the presidential election. Both the ruling and opposition parties have decided their presidential candidates and made real estate policy their top campaign pledge. Ultimately, the reason multi-homeowners and others are in ‘endure’ mode is because of the presidential election. They expect regulatory easing to follow after the election. Whether their ‘Jonbeo’ will succeed or not is unknown at present. However, it is clear that despite the current government’s various regulations labeling the real estate market as speculative, the transaction freeze phenomenon, especially in apartments centered in the metropolitan area, is intensifying. The burden is ultimately passed on to ordinary citizens.

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