A month after the moratorium on heavier capital gains taxes for multiple-home owners ended, land transaction permit applications in Seoul have fallen by more than 40 percent on a daily average. The government allowed even non-resident single-home owners to sell properties with existing leases in an effort to prevent a transaction freeze, but the move failed to reverse the slowdown. Seoul apartment prices have risen for 71 consecutive weeks, and upward pressure is intensifying as fewer listings, declining transactions, and a jeonse shortage compound one another.
According to the Saeol electronic civil affairs system on Wednesday, land transaction permit applications across Seoul's 25 districts averaged just 190 per day from May 10, when the heavier capital gains tax for multiple-home owners was reinstated, through June 10. That represents a 47.4 percent plunge from the daily average of 362 between May 1 and 9, when applications surged ahead of the tax reinstatement, and a 44.1 percent drop from the daily average of 340 in April. The figure returned to February levels (a daily average of 183.5), when transactions began reviving as multiple-home owners flooded the market with distressed sales.
A closer look shows the slowdown is even more pronounced. In the period right after the tax was reinstated, from May 10 to 18, applications averaged 211 per day, down 41.6 percent from just before the moratorium ended, and fell to 137 later that month. After the government allowed transactions of non-resident single-home owners' properties with existing leases starting May 29, the figure recovered slightly to a daily average of 221, but still fell short of March (276) and April.
The freeze was steepest in Gangnam's three districts, where high-priced apartments are concentrated. Seocho-gu received 411 applications throughout April but only 135 in the month from May 10, a 67.2 percent plunge. Gangnam-gu and Songpa-gu each fell 55 percent, and Dongjak-gu dropped 52 percent. Gangseo, Yongsan, Seongdong, Dongdaemun, and Mapo districts also saw transactions shrink by more than 40 percent.
Distressed Sales Dry Up, Jeonse Shortage Compounds Price Pressure
This decline in transactions came as homeowners quickly withdrew listings they had put up to avoid taxes once the heavier capital gains tax took effect on May 10. According to property platform Asil, Seoul apartment listings stood at 68,495 on May 9, but over the following three days 1,581, 1,232, and 1,697 listings disappeared respectively. As of Wednesday, Seoul apartment listings numbered 61,537, a 10.2 percent (6,958-unit) decline over the month.
With multiple-home owners no longer having reason to sell at distressed prices, they are raising asking prices. According to the Korea Real Estate Board, the sale price index rose 0.28 percent, 0.31 percent, 0.25 percent, and 0.32 percent each week since May 11, just after the heavier capital gains tax took effect, for a cumulative 1.08 percent gain through Wednesday. This contrasts with weekly increases of between 0.05 percent and 0.15 percent in March and April, when transactions of homes owned by multiple-home owners were active.
The continued rise in jeonse prices, which is deepening the jeonse and monthly rent shortage, is also adding to upward pressure on home prices. The jeonse increase rate, which climbed to the 0.20 percent range from the fourth week of April, widened to 0.28 percent and 0.29 percent after May 9, before reaching 0.32 percent in the second week of June (as of June 8). Over the past month, the cumulative jeonse price increase of 1.18 percent outpaced the 1.08 percent rise in sale prices. The jeonse supply-demand index recorded 121.2 (above 100 indicates supply shortage), breaking through the 120 level for the first time in five years since February 2021.
Dongtan Prices Jump 2% in One Week; Tax Reform, Jeonse Shortage Cloud Outlook
Experts diagnose that the listing lockup caused by the reinstatement of the heavier capital gains tax is raising upward pressure on home prices at a time when instability in the rental market is already mounting due to supply shortages. Shin Bo-yeon, a professor in the Department of Real Estate AI Convergence at Sejong University, noted, "Sellers are holding out for previous peak prices while buyers are waiting only for price corrections, along with expectations that the government will announce additional measures, so the gap between the two sides keeps widening."
The prevailing forecast is that home prices will continue rising as listing lockups and declining transactions persist. According to the Korea Real Estate Board, Seoul apartment sale prices rose 0.27 percent in the second week of June, marking 71 consecutive weeks of increases. Yoon Ji-hae, head of the research lab at Real Estate 114, said, "Right now this largely reflects the psychological factors of sellers and buyers being priced in preemptively, while the listing lockup effect is less reflected. Home prices could move in different directions depending on whether tenants, who receive large sums such as jeonse deposits back at lease expiration, remain in jeonse or monthly rent or switch to buying."
Home prices are rising steadily not only in Seoul but in Gyeonggi Province as well. In particular, prices are climbing sharply in the southern Gyeonggi region, which is benefiting greatly from the semiconductor boom. The apartment sale price index for Dongtan-gu in Hwaseong rose 1.98 percent in the second week of June, more than tripling the previous week's increase (0.60 percent). That is seven times the rate of Seoul's home price increase and about 10 times the Gyeonggi average (0.20 percent).
However, some observers say that if the holding tax is raised amid the government's announced tax reform, distressed sales could re-emerge, mainly among the elderly, slowing or stabilizing the rise in home prices. Professor Shin said, "The current wait-and-see stance is likely to continue until the tax reform plan emerges around the end of next month. If powerful real estate tax reform is carried out and additional supply measures follow, home prices could undergo a correction."
45% of Seoul's New Homeowners Are 'First-Time Buyers'; People in Their 30s Snap Up Distressed Sales
When the heavier capital gains tax for multiple-home owners was reinstated on May 10, a substantial number of distressed sales that flooded the market for tax-saving purposes were bought up by people without homes, the data showed. Over the first five months of this year, the number of single-home owners nationwide increased by nearly 120,000, and in Seoul roughly one in two home buyers purchased a 'first home.'
According to the Supreme Court's Iros registration information plaza on Wednesday, as of May the number of single-home owners nationwide holding one collective building (apartments, row houses, officetels, etc.) reached about 12.31 million, up 119,952 (0.98 percent) from the start of the year. Over the same period, the number of two-home owners fell by 4,962 (-0.29 percent), and that of owners of three or more homes fell by 3,735 (-0.74 percent). In effect, people without homes absorbed the listings released ahead of the moratorium's end. The ownership index, which represents the proportion of those holding one or more homes, stood at 28.26 percent last month, the highest since the statistics began in 2010.
This phenomenon was pronounced in Seoul, where tax-avoidance listings emerged en masse. Of 72,025 collective building sale registrations in Seoul from January to May this year, first-time purchases accounted for 32,843, or 45.6 percent. That is more than 9 percentage points higher than the same period last year (36.5 percent) and the highest since the statistics were disclosed in 2010. In April and May in particular, the figures reached 48.7 percent and 48.5 percent respectively, approaching half.
First-time purchases were concentrated in non-Gangnam areas, where price burdens are lower. Nowon-gu was highest at 60.6 percent, followed by Seongbuk-gu (59.8 percent), Gangbuk-gu (57.2 percent), Seodaemun-gu (55.2 percent), and Gwanak-gu (52.7 percent). By contrast, Gangnam-gu was lowest at 31.6 percent. By age, 56.1 percent of first-time buyers were in their 30s, surpassing last year's average (49.8 percent) to account for a majority for the first time.
Experts see this as the result of first-time buyers, who can receive policy funds, snapping up distressed sales of 15 billion won or less—transactions that had to be completed by May 9—as lending thresholds in regulated zones rose. Even after distressed sales disappeared, the buying momentum among people in their 30s without homes has not weakened as the jeonse and monthly rent shortage deepens. Nam Hyuk-woo, a real estate research fellow at Woori Bank, said, "Real demand purchases, mainly by single-person households without homes or newlyweds, continue on the outskirts of the northeastern region. The 'price catch-up' that began in Seongbuk and Nowon is spreading to areas that had risen less until now, such as Jungnang and Dobong."
