Gangnam 3 districts and Yongsan-gu reverse course after heavy capital gains surcharge resumes; units with sitting tenants account for 27.2% of applications

Apartment complexes in Songpa-gu, Seoul, and the neighboring Hanam area of Gyeonggi Province, as seen from the Seoul Sky observation deck atop Lotte World Tower in Songpa-gu. [Herald Business DB]
Apartment complexes in Songpa-gu, Seoul, and the neighboring Hanam area of Gyeonggi Province, as seen from the Seoul Sky observation deck atop Lotte World Tower in Songpa-gu. [Herald Business DB]

The number of land transaction permit applications for Seoul apartments fell more than 30% in May from the previous month, the Seoul Metropolitan Government said Thursday. The drop came after a surge of filings in April ahead of the expiration of the multi-home owners' capital gains surcharge exemption, with activity cooling sharply once the exemption ended. Despite the slowdown in transactions, apartment prices accelerated their gains — particularly in the Gangnam 3 districts (Gangnam-gu, Seocho-gu and Songpa-gu) and Yongsan-gu, where a glut of distressed listings from multi-home owners had been absorbed, pushing those areas from decline into positive territory.

New land transaction permit applications for Seoul apartments stood at 6,087 as of the end of May, down 32.0% from 8,952 the previous month, the Seoul Metropolitan Government said Thursday. April had set a monthly record as applications surged ahead of the May 9 deadline for the capital gains surcharge exemption. Even in the first week of May — which included the final filing deadline — 3,213 applications were received across Seoul, averaging 642.6 per day. Once the surcharge resumed in weeks two through four of May, the daily average dropped to 205.3.

By zone, the share of applications from the high-end Gangnam 3 districts and Yongsan-gu temporarily expanded in the first week of May as last-minute tax-saving demand flooded in, nearly doubling to 20.7% from 10.9% three months earlier. The seven Han River belt districts — Gwangjin-gu, Seongdong-gu, Mapo-gu, Dongjak-gu, Yangcheon-gu, Yeongdeungpo-gu and Gangdong-gu — also saw their share rise from 21.6% to 24.2% over the same period.

After the exemption expired, the Gangnam 3 districts and Yongsan-gu's share of applications fell back to 12.2% from the second week of May onward.

Land transaction permit application status by district. [Provided by Seoul Metropolitan Government]
Land transaction permit application status by district. [Provided by Seoul Metropolitan Government]

So-called "tenanted listings" — units sold with sitting tenants — accounted for roughly one in three transactions and were concentrated in high-end neighborhoods. Ahead of the resumption of the capital gains surcharge on multi-home owners, the government granted an owner-occupancy requirement exemption to buyers who purchased units within land transaction permit zones that already carried active lease contracts. From April through the first week of May, 3,311 of the 12,165 apartment land transaction permit applications — or 27.2% — were filed under this owner-occupancy exemption, up 9.8 percentage points from 17.4% the previous month.

By zone, the seven Han River belt districts recorded the highest share of owner-occupancy exemption applications at 38.2%, followed by the Gangnam 3 districts and Yongsan-gu at 25.5%, the 10 northern Seoul districts at 23.6%, and the four southwestern districts at 22.6%.

Price gains accelerated. The average declared transaction price across all Seoul land transaction permit applications filed from May 1 through May 31 rose 1.55% from the previous month.

The Seoul Metropolitan Government said price growth had slowed in February and turned negative in March as multi-home owners rushed to sell for tax purposes while genuine buyers entered the market simultaneously, following the announcement of the surcharge exemption's end. Prices rebounded in April and the pace of gains widened further in May.

A rebound in Gangnam-area prices and broader gains outside Gangnam emerged at the same time. The Gangnam 3 districts and Yongsan-gu rose 0.81% in May from the previous month, reversing a prior decline. The seven Han River belt districts climbed 1.36%, widening their gain from April.

The 10 northern Seoul districts rose 1.72% in May, while the four southwestern districts posted the steepest increase in the city at 2.08%. The Seoul Metropolitan Government said areas with a higher proportion of mid-to-lower-priced apartments faced relatively lighter financing burdens, sustaining a steady flow of genuine buyers; as multi-home owners' listings were absorbed, upward price pressure intensified.

By district, Nowon-gu recorded the highest cumulative number of applications at 5,191, followed by Gangseo-gu with 2,963, Songpa-gu with 2,807, Seongbuk-gu with 2,739 and Guro-gu with 2,572.

Cumulative applications since the citywide land transaction permit system took effect last October through the end of May totaled 43,266. Of those, 41,453 had been processed, a completion rate of 95.8%. The Seoul Metropolitan Government publishes monthly data on land transaction permit application volumes and price movements across all 25 districts to reduce information gaps in the real estate market during the permit review period before housing contracts are finalized.

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