"Gangnam Mood Has Shifted"...Multi-Home Owners Rush to Sell, But Buyers Still Expect 'Further Drops' [Real Estate AtoZ]

A densely packed apartment area in Seoul. Yonhap News

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In Seoul's Gangnam area, apartment sale transactions with prices cut by tens of millions of won within about a month are emerging one after another. As more properties are being listed ahead of the resumption of heavy capital gains tax in May and asking prices are clearly on a downward trend, there are now cases being reported at prices lower than previous transaction levels.

On the other hand, there are still not a few cases where the latest reported prices are higher than the previous record highs. In the case of apartment transactions in Seoul, there is a certain time lag between when the parties agree to the terms and when the actual transaction is completed and reported. With about a month having passed since President Lee Jaemyung declared the reinstatement of heavier capital gains taxation, attention is focusing on whether apartment prices in Gangnam, which had driven Seoul's home price increases, will now turn downward.

According to the actual transaction price disclosure system of the Ministry of Land, Infrastructure and Transport on the 24th, an 84-square-meter exclusive-use unit in Gyeongnam Honorsville in Yeoksam-dong, Gangnam-gu, Seoul was traded for 1.5 billion won on the 13th of this month. Compared with the previous peak price of 1.6 billion won in December last year, it changed hands at a price 100 million won lower. An 84-square-meter exclusive-use unit in Parkrio in Sincheon-dong, Songpa-gu also had a transaction record posted on the 12th of this month at 2.98 billion won, which is 70 million won lower than last month's highest actual transaction price of 3.05 billion won.

President Lee has been repeatedly stressing his intention to roll back the benefits that multi-homeowners have enjoyed and to increase their "holding costs." In this situation, as quick-sale listings aimed at tax savings come onto the market, apartment prices appear to be losing steam, particularly in the Gangnam area.

According to data from the Korea Real Estate Board, apartment prices in Gangnam-gu in the third week of February (as of the 16th) rose 0.01% from the previous week, effectively moving sideways. A week earlier, the increase had been 0.02%. Seocho-gu also rose 0.05%, but the pace of increase slowed compared with the 0.13% rise in the previous week. In Songpa-gu, prices had risen 0.09% in the previous week, but in the third week the increase narrowed to 0.06%.

On the 22nd, apartment sale listings such as Geupmae and Chogeupmae are displayed at a real estate agency in Gangnam-gu, Seoul. Yonhap News

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This is far below the overall 0.15% increase in apartment prices across Seoul. Considering that the three Gangnam districts had previously led the overall rise in Seoul last year, this represents a clearly different trend. According to the Korea Real Estate Board, the apartment sale price index for Gangnam-gu had risen steadily from mid-March 2024 until recently.

An 84-square-meter exclusive-use unit in Gaepo Xi Residence in Gaepo-dong, Gangnam-gu was actually traded for 4.27 billion won in December last year, but as of the previous day there was a listing on the market for 3.7 billion won, labeled as a "multi-homeowner quick sale." A listing for the same size at 3.75 billion won carried the description "multi-homeowner, prime building and floor." A nearby certified real estate agent A said, "Multi-homeowners are putting properties on the market after cutting their asking prices by hundreds of millions of won, but actual transactions have not yet taken place," adding, "Ninety percent of prospective buyers are just watching, expecting that asking prices will fall further."

In addition to listings aimed at avoiding heavier capital gains tax, properties anticipating that, after the local elections in June, changes to holding taxes and reductions in the special long-term holding deduction will begin in earnest are also coming onto the market, increasing the number of apartments waiting for buyers. According to real estate big data firm Asil, as of the previous day there were 4,922 apartment sale listings in Songpa-gu, about a 40% increase compared with 3,526 during the same period a month earlier. Listings also increased by 50% in Seongdong-gu, 22% in Seocho-gu, and 16% in Gangnam-gu.

Kwon Youngseon, team leader at the Shinhan Bank Real Estate Investment Advisory Center, said, "We expect that as multi-homeowners put their properties on the market until May 9, when the grace period for heavier capital gains tax ends, prices will fall and more properties will be released," but added, "Even if property prices in the three Gangnam districts do turn downward, we do not expect a large drop, because it is not that all Gangnam homes will come onto the market, but only a portion consisting of multi-homeowner listings."

He went on to say, "Rather than apartment prices in the three Gangnam districts falling and other areas following suit, there is a possibility that overall real estate prices will undergo an adjustment as properties come onto the market in areas where multi-homeowners are trying to sell first."

Meanwhile, on the same day, President Lee shared on X (formerly Twitter) an article stating that expectations for further home price increases had weakened, and wrote, "Whether you maintain multiple homes, hold non-residential investment properties, or own ultra-high-priced homes that cost 300 million won per pyeong, that is your freedom, but you cannot avoid the risks and responsibilities that come with normalizing what is abnormal." By the "abnormal" he pointed to, he was referring to the rapid rise in apartment prices in key areas of the Seoul metropolitan region centered on Seoul, and further to the standards and systems that enabled such sharp increases.

President Lee added, "Normalizing the real estate market is difficult, but it is easier than rectifying illegal valley facilities or normalizing the stock market," and "It is only natural that expectations for an abnormal upward trend in home prices continuing even under a people's sovereignty government should diminish."

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