‘Niche Market’ Apartments with Official Prices Under 100 Million Also Face Transaction Freeze

Low Acquisition Tax Boosts Small Investments
Direct Hit from Upcoming Intensive Investigation
Buying Demand Drops, Prices Plummet

Apartment complexes in the Eunpyeong-gu and Seodaemun-gu areas of Seoul (Photo by Yonhap News)

[Asia Economy Reporter Ryu Tae-min] "Until October, corporate and non-local investors who used to come and go daily have almost completely stopped in the past month or two. With loan regulations and the government focusing on investigating apartment transactions under 100 million won, there are practically no transactions, so it's like a 'business suspension'." (A representative from A Real Estate Agency in Wolgot-dong, Siheung-si, Gyeonggi Province)

The apartment market with official prices under 100 million won, which was popular among investors due to low acquisition tax, also seems to be freezing rapidly. This is because the government applied high-intensity loan regulations and announced a focused investigation on transactions of these apartments to block gap investments and speculative forces.

Jueun Cheongseol Apartments in Jinsari, Gundo-eup, Anseong-si, Gyeonggi Province, located at the entrance of Anseong IC on the Gyeongbu Expressway, was the apartment complex with the highest transaction volume nationwide last year. This complex, with a total of 2,295 households, had 506 transactions last year, meaning one in every four units changed owners. The concentration of transactions was due to a large influx of small investors avoiding government regulations. While the government raised acquisition tax rates for multi-homeowners up to 12%, it made exceptions for houses with official prices under 100 million won, leading non-locals to competitively purchase these apartments.

However, as the housing transaction market sharply froze at the end of last year, the low-priced housing market with official prices under 100 million won also seems to have taken a direct hit. With the disappearance of buyers, transactions have stopped and prices have plummeted.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 4th, the transaction volume of Jueun Cheongseol Apartments in November and December last year was only 17 cases. This is a complete reversal from the average monthly transaction volume of 49 cases until October. As the buying demand disappeared, prices also plunged. The 49㎡ (exclusive area) apartment was actually traded for 154 million won on December 25 last year. This is 46 million won lower than the highest price of 200 million won in September three months earlier. The 39㎡ apartment also plummeted from 175 million won in September last year to 129 million won in December of the same year.

Other low-priced apartment complexes that ranked high in transaction volume last year show similar situations. Jueun Punglim near Jueun Cheongseol had an average monthly transaction volume of 48 cases from January to October last year, but shrank to 11 cases in November and 4 cases in December. For the same reason, Jinju Maeul Punglim I-One 1st Complex in Wolgot-dong, Siheung-si, which attracted demand, had a total of 399 sales transactions until October last year, averaging 40 cases per month, but the transaction volume was only 7 and 2 cases in November and December, respectively.

The 49㎡ unit in Jueun Punglim was traded for 150 million won on December 27 last year. This is 35 million won lower than the 185 million won transaction in October last year. The 39㎡ apartment was sold for 175 million won on September 27 last year but changed hands for 129 million won on December 17 last year. A representative from B Real Estate located in Yongdu-ri in the area said, "About 4 to 5 customers visited last month, but all were only interested in urgent sales," adding, "Homeowners are taking a wait-and-see stance ahead of the presidential election, so it is practically difficult to close transactions unless it is an urgent sale."

The sharp contraction in transactions is understood to be because investment demand aiming for short-term capital gains was concentrated in a short period, but there is no real demand to support it. It seems to have been influenced by the financial sector strengthening loan regulations since the end of last year. In addition, the recent government’s high-intensity investigation into low-priced apartment purchases is interpreted as causing a decline in popularity even for complexes with official prices under 100 million won.

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