An aerial view of the Raemian One Bailey apartment complex in Banpo-dong, Seocho-gu, Seoul. [Herald DB]
An aerial view of the Raemian One Bailey apartment complex in Banpo-dong, Seocho-gu, Seoul. [Herald DB]

Transactions of high-priced apartments jumped in April and May as sellers rushed to offload properties before the government's toughened capital gains tax surcharge took effect. Despite major banks tightening lending conditions, selling pressure spiked temporarily after the surcharge on multi-home owners kicked in on May 10 and the government moved to raise property holding taxes on ultra-luxury homes.

An analysis of Ministry of Land, Infrastructure and Transport transaction data published Sunday found that of 8,779 apartment deals signed in Seoul in May — excluding purchases by public institutions and canceled contracts — 2,446 involved units priced above 1.5 billion won ($1.04 million), representing 27.9 percent of all transactions.

Seoul's high-end apartment market had been cooling consistently after the government's Oct. 15 measures last year capped mortgage loans for homes above 1.5 billion won at between 200 million and 400 million won. Selling activity began picking up in earnest in April, when the share of transactions above that threshold reached 24.2 percent, before surging to around 28 percent in May — the highest level of the year.

As the capital gains surcharge deadline approached, owners of premium complexes cut prices to move properties quickly, drawing in buyers hunting for discounted listings. The government's decision to exempt homebuyers without existing properties from the owner-occupancy requirement in land transaction permit zones during their jeonse contract period — and to exclude deals filed for land transaction permits by May 9 from the surcharge — also contributed to the rush.

Transactions in the ultra-luxury segment above 3 billion won surged as well. Deals in that price range climbed from 156 in March to 442 in April and 514 in May. Their share of total transactions expanded from 5.11 percent in April to 5.9 percent in May.

Seven contracts for apartments priced at 10 billion won or more were signed in May alone — more than double the three recorded in April.

By contrast, the share of transactions involving apartments priced at 1.5 billion won or below, which had risen to 83.4 percent in March, fell to 72.1 percent in May.

Once the capital gains surcharge took effect, the market shifted back. From June onward, high-end transactions declined and mid-to-lower-priced deals became dominant again. The share of transactions at or below 1.5 billion won rose to 76.5 percent in June, and 82 percent of deals reported so far in July have fallen in that range — reflecting concentrated buying in complexes where loans of up to 600 million won remain available.

The share of transactions above 3 billion won fell to 4.6 percent in June and stands at just 3.2 percent in July based on deals reported to date.

Industry watchers expect selling pressure in the ultra-luxury segment to pick up again, as the tax reform package due this month is widely anticipated to raise both holding taxes and capital gains taxes on high-end properties at the same time.

Meanwhile, the government plans to unveil a real estate tax reform package next week that would ease the tax burden on owner-occupants with a single home while raising it on multi-home owners and ultra-luxury property holders. The Democratic Party of Korea and the government held a closed-door party-government consultation at the National Assembly members' office building in Seoul on Thursday to finalize adjustments to the second-half tax reform plan, including real estate-related measures.


likehyo85@heraldcorp.com