Distressed listings appear across Jamsil
Owners seek upgrades or downsizing amid tax burden
'Larger price correction will be limited,' analyst says
Songpa-gu apartment prices down 0.12% this week
"Homeowners who want to move up to Apgujeong or Banpo are asking us to sell quickly, even at a lower price. Prices there have dropped 500 million won ($362,000), while here they've only come down about 200 million won — so they figure there's still room to go lower."
— Agent A, Daeseong Ricentz Real Estate Agency, Jamsil-dong, Songpa-gu, Seoul
A correction in high-end Seoul apartment prices that began in Gangnam and Seocho following the Aug. 3 tax reform proposal has spread to the Jamsil area of Songpa-gu, setting off a standoff between sellers and buyers. Homeowners looking to trade up to more prestigious neighborhoods or downsize to reduce their tax burden are cutting asking prices, while buyers are holding back and waiting for further declines after the Chuseok holiday.
At real estate agencies near the "Elite" complexes — Elz, Ricentz and Trizium — in Jamsil-dong, Songpa-gu, notices for distressed listings were easy to spot on Thursday afternoon. At one agency visited, the phone rang with inquiries seeking the lowest-priced units on the market.
The head of Agency B said transactions have stalled, with sellers cutting prices by 50 million to 100 million won at a time. "An 84-square-meter unit that was going for 3.5 billion won has now come out as a distressed listing at 3.4 billion won," the agent said. Agent A added that a Han River-facing unit of the same size had sold at a record high of 3.695 billion won a few months ago, and similar units are now being listed at 3.5 billion won. "If you go a bit lower in the complex, units that were going for 3.5 billion to 3.6 billion won are now coming out as distressed listings at 3.35 billion won," the agent said.
The price correction in Jamsil and the resulting shift toward a buyer's market are widely attributed to heavier property holding and capital gains tax burdens introduced under the Aug. 3 tax reform proposal. The finalization of measures — including a higher fair market value ratio, tougher comprehensive real estate tax rates by property value bracket, a new cap on the long-term holding deduction and stricter residency requirements — prompted multi-home owners and those looking to trade up to a single, higher-tier property to begin putting their units on the market.
The head of Agency C, near the Trizium complex in Jamsil-dong, said distressed listings have not flooded the market as sharply as in Apgujeong, where capital gains are larger, but they are steadily accumulating as sellers wait and watch. "There are probably 20 to 30 distressed units in this complex alone," the agent said, adding that as the cheapest listings sell off one by one, overall apartment prices in Songpa-gu appear to have dipped slightly.
As distressed listings continue to emerge, the supply of apartments for sale across Songpa-gu is growing, and actual transaction prices at some complexes have come in hundreds of millions of won below their record highs. According to Asil, a real estate big data platform, the number of Songpa-gu apartments listed for sale stood at 6,367 as of Friday, up 27.1% from 5,006 on July 18, two months earlier. An 84-square-meter unit at the Jamsil Elz complex, which set a record high of 3.7 billion won last February, changed hands at 3.325 billion won on Saturday.
Agents on the ground said a particularly notable trend is homeowners seeking to downsize as a way to reduce their tax burden. Agent B said elderly homeowners worried about taxes have been advised to sell and cut their liability. "A number of clients said they plan to move somewhere 1 billion won cheaper and use the difference for their children," the agent said.
An agent at another Jamsil-dong real estate office said many older sellers are looking to move to Geoyeo-dong within Songpa-gu or to neighboring Gangdong-gu. "Prices in the outer parts of Seoul have been rising sharply, but Songpa-gu doesn't look like it will bounce back quickly," the agent said.
Buyers, however, are largely staying on the sidelines. Agents said buyers are holding out for further price declines in the wake of interest rate increases and the tax reform, and are waiting to see how the market moves after Chuseok.
"Buyers seem to be waiting, expecting prices to fall further after Chuseok," Agent B said. Agent A said Jamsil is typically the first stop for buyers hoping to break into the top three Gangnam-area districts, and that while property visit inquiries had been frequent until two weeks ago, the market has since gone quiet. "Now there are just a handful of people on a waiting list who say they'll be in touch once their current home sells," the agent said.
Experts, however, said a steep further decline in the Songpa-gu area is unlikely.
Ham Young-jin, head of the real estate research lab at Woori Bank, said buyers with available funds could attempt to trade up while the market is hesitant amid an unfinalized tax reform and relatively high interest rate burdens, but cautioned that "a larger price correction will be limited."
Ham added that Songpa-gu's current decline is not steep and that the area has posted cumulative gains of more than 5% this year. "Taking into account autumn moving-season lease demand, a shortage of listings and a decrease in new Seoul apartment move-ins next year, prices are likely to hold at around current levels," he said.
Meanwhile, Songpa-gu apartment prices fell for a second consecutive week, according to Korea Real Estate Board data. After dropping 0.02% last week to turn negative, prices declined 0.12% this week, with the pace of decline accelerating from the previous week.
shy@heraldcorp.com
hwshin@heraldcorp.com
