"If We Miss Today, It's Over"...Rushing to the District Office in the Middle of Signing Contracts [Real Estate AtoZ]

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On the afternoon of the 9th, the last day of the deferment of the increased capital gains tax for multiple homeowners, at around 5:20 PM, visitors came into the Real Estate Information Division of Seongbuk District Office in Seoul to apply for land transaction permits. On that day, Seongbuk District Office operated a weekend reception window until 6 PM. Photo by Choi Seoyoon

Around 5:20 p.m. on the 9th, the last day for the postponement of the enhanced capital gains tax on multi-homeowners, five people—including a couple selling their home, the buyer, and certified real estate agents from both sides—rushed into the Real Estate Information Division at Seongbuk District Office in Seoul. There were only 40 minutes left until the land transaction permit application deadline. As multi-homeowners, the couple needed to complete their application by that day to avoid the higher capital gains tax.

The couple said, "We were contacted just an hour ago and rushed over." The real estate agent representing the buyer said, "I hurried here after working on another client's contract. Today is the last day, right?" while catching his breath. In anticipation of last-minute transaction demand, the government operated land transaction permit counters on Saturday the 9th at all 25 district offices in Seoul and some city and district offices in Gyeonggi Province.

Although dramatic scenes unfolded at the last-minute counters on the 9th, the overall atmosphere that day was more subdued. The number of land transaction permit applications at Seongbuk District Office that day was 15, falling short of the recent weekly average of 40 per day.

On the 9th, public officials at the Real Estate Information Department of Nowon District Office in Seoul are processing applications for land transaction permits. Photo by Choi Seoyoon

The situation was the same at Nowon District Office, which handles the highest volume of apartment sales among Seoul’s districts. An official from Nowon District Office commented, "Most people who needed to apply already did so in advance, so there aren’t many applications today," adding, "Since the weekend application policy was announced only two days ago, some people might not have heard about it yet."

As of 3 p.m. that day, the number of land transaction permit applications submitted to Nowon District Office was 15. The official explained, "This week, the daily average number of applications was around 100, double the usual amount, so staff worked overtime and on weekends."

In the case of Songpa District, which sees the highest transaction volume in the Gangnam area, the number of applications as of 1 p.m. that day was four. A Songpa District Office official said, "There were 42 applications submitted by the day before, but today is relatively quiet."

On the 9th, a land transaction permit application desk was set up in the lobby on the first floor of Songpa-gu Office in Seoul. Songpa-gu Office installed computers at the information desk and processed weekend applications in preparation for last-minute requests. Photo by Choi Seoyoon

Starting on the 10th, the enhanced capital gains tax on multi-homeowners was reinstated. With the end of the four-year temporary suspension that began in 2022, when a multi-homeowner sells a house in a regulated area, an additional tax rate of 20 percentage points applies to owners of two homes, and 30 percentage points for those with three or more, on top of the basic capital gains tax rate (6–45%). Including the 10% local income tax, the maximum effective tax rate can reach 82.5%.

Remaining homeowners are choosing to withdraw their listings rather than lower prices. The owner of a real estate agency near Helio City in Songpa-gu, Seoul, said, "Many homeowners have taken their listings off the market, and we plan to remove the quick-sale notices as well. Now that they are subject to the higher tax, there’s no reason to lower prices further, so they have no intention of reducing them." Another agency owner near Helio City remarked, "Homeowners now feel entitled to higher prices because of the additional tax burden. Last month, an 84-square-meter unit was offered as a quick sale for 2.7 billion won, but by around Chuseok, I expect prices to recover to around 3.1 billion won or even increase further."

An agency owner in Jamwon-dong, Seocho-gu, also noted, "As multi-homeowner listings increased, prices for each size category dropped by about 500 million won, but starting Monday, price cuts will stop. Now, many homeowners are willing to hold on and bear the tax burden." The owner of a real estate office near Magok M Valley Complex 7 in Gangseo-gu, where real homebuyer demand remains steady, said, "Elderly multi-homeowners often decide, after discussing with their children, to just keep the property for now. Even if they have to pay more comprehensive or property taxes, the prevailing sentiment is to hold on." This suggests that many assess the capital gains tax burden as being heavier than the property holding taxes.

On the 9th, an urgent sale notice was posted at a real estate agency near Helios City in Songpa-gu, Seoul. With the additional capital gains tax on multiple homeowners taking effect from the 10th, real estate agencies on site expect that multiple homeowners will withdraw their listings, intensifying the scarcity of available properties. Photo by Seo-yoon Choi

Some multi-homeowners who have given up on selling are now turning to the rental market. As of the 10th, the number of apartment leases (jeonse and monthly rent) in Seoul reached 31,574, showing an increase since the end of April. A real estate agency owner in Sanggye-dong, Nowon-gu, said, "Many people have no intention of selling cheaply, and if the property doesn’t sell, they’ll just rent it out." Rental prices are rising. Another agency owner in Nowon-gu commented, "Even though Nowon is the least expensive area in Seoul, monthly rents have gone up significantly. For a 79-square-meter unit, monthly rent has jumped from around 900,000 won a year ago to 1.2 to 1.5 million won now." He added, "Even jeonse prices have risen by tens of millions of won, and now there’s barely any inventory available."

Experts analyzed that the reintroduction of the enhanced capital gains tax will further deepen the disappearance of transactions and the freeze in listings. Son Jaeyoung, Professor Emeritus of Real Estate Studies at Konkuk University, said, "As the tax burden grows, multi-homeowners will likely adopt a wait-and-see stance rather than sell, resulting in a market freeze." He added, "The core issue in the real estate market is supply and demand. Unless the supply shortage is addressed, tax adjustments will have only a minor effect."

Ham Youngjin, Head of Real Estate Research Lab at Woori Bank, said, "It is more likely that multi-homeowners will opt for gifting or holding onto their properties, rather than lowering prices to sell. With rising jeonse and monthly rent prices, the real demand in Seoul’s outskirts and the holding sentiment in the Gangnam area are likely to keep prices stable or even push them higher."

The government has moved to address concerns about a freeze in housing inventory. On the 10th, Minister of Land, Infrastructure and Transport Kim Yoon-duk stated on X (formerly Twitter), "Whether or not the enhanced capital gains tax applies is just one of many factors influencing housing prices. We will completely redesign the economic incentive structure, including finance, taxation, and supply."

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