After Tax Overhaul, 8 in 10 Seoul Apartment Deals Under 1.5 Billion Won

Eight out of 10 Seoul apartment transactions were for 1.5 billion won or less. Since the government announced its tax overhaul raising tax burdens on high-priced homes, buyers have increasingly gravitated toward relatively cheaper homes over pricey ones. According to the Ministry of Land, Infrastructure and Transport's real transaction price system, apartments in Seoul contracted after the tax overhaul announcement in August showed a share of deals at 1.5 billion won or below of roughly 79% (excluding contract cancellations and purchases by public institutions). This share had already risen from 73.3% to 76.8% over the previous 10 months, and climbed further after the tax changes.

Lending regulations have shifted the direction of buying demand. With mortgage loan limits cut to a maximum of 600 million won for homes valued at 1.5 billion won or less, 400 million won for homes over 1.5 billion to 2.5 billion won, and 200 million won for homes above that, demand has flooded toward homes priced at 1.5 billion won or below, which allow relatively larger loans (based on data reported to the ministry's real transaction price system).

The increase was especially steep for deals of 600 million won or below, which qualify for low-interest policy loans such as the first-time homebuyer fund. This segment's share reached 25% of the total — a steep rise from 17.0% before the Oct. 15 measures and 20.5% from the measures' introduction through July this year.

Even within the 1.5 billion won or below range, differences by price band are clear. Deals of over 600 million to 900 million won rose from 23.2% before the Oct. 15 measures to 25.9% afterward and 27.6% since August this year, while deals of over 900 million to 1.5 billion won fell from 33.1% to 30.4% and then 26.3% since August this year. Apartments of over 1.5 billion to 2.5 billion won, which allow loans of up to 400 million won, also kept shrinking, from 18.4% to 16.0% and 15.3% since August. Luxury apartments above 2.5 billion won — the tax overhaul's target — likewise fell from 8.3% to 7.2% and 5.8%.

In the high-end market, distressed listings priced 1 billion to 2 billion won or more below their previous peaks are proliferating, centered on ultra-high-end complexes in the Gangnam area. Buyers remain on the sidelines amid uncertainty over the tax overhaul and rising holding tax burdens, leaving transactions sluggish.

The decline in trading volume has also spread to prices. According to the Korea Real Estate Board, Gangnam and Seocho districts have posted eight consecutive weeks of declines since the tax overhaul was announced, while non-Gangnam areas, including northern Seoul, have maintained an upward trend.