Seoul apartment deals under 1.5 bn won reach 79% after tax reform plan

Roughly four out of five Seoul apartments sold since the government announced its Aug. 3 tax reform plan went for 1.5 billion won or less, according to an analysis of Ministry of Land, Infrastructure and Transport real transaction data reported by Yonhap, Maeil Business, Hankook Ilbo, Dong-A Ilbo and Asia Economy. Dong-A Ilbo said the 79.0% share covered 5,241 contracts signed since Aug. 3 and excluded cancelled deals and purchases by public institutions. The share of deals at or below 1.5 billion won was 73.3% in the 10 months before last year's Oct. 15 measures and 76.8% in the following 10 months to July, the reports said. [ 2 , 3 , 4 , 5 , 6 , 7 ]

Within that band, cheaper homes gained most. Transactions at 600 million won or below — the range eligible for low-interest policy loans such as the first-time buyer fund — rose to 25% of the total, from 17.0% before the Oct. 15 measures and 20.5% after them, the documents said. The 600 million to 900 million won band rose from 23.2% to 27.6%, while the 900 million to 1.5 billion won band fell from 33.1% to 26.3%. Above 1.5 billion won, the 1.5-2.5 billion won share slipped from 18.4% to 15.3%, and the above-2.5 billion won share, the tax plan's target, fell from 8.3% to 5.8%. [ 2 , 4 , 5 , 6 , 7 ]

The reports attributed the shift to mortgage caps set under the Oct. 15 measures: loans are limited to 600 million won for homes valued at 1.5 billion won or less, 400 million won for 1.5-2.5 billion won and 200 million won above 2.5 billion won. Yonhap quoted a real estate agent in Sanggye-dong, Nowon district, saying that with new jeonse listings disappearing, young couples were taking first-time buyer loans and switching to purchases, and that borrowing up to 70% of the price and up to 320 million won at around 3% interest was more favourable than a standard mortgage. Asia Economy said a 900 million won apartment would still require at least 540 million won of the buyer's own funds under a 40% loan-to-value ratio. [ 2 , 4 , 7 ]

High-priced districts moved the other way. Korea Real Estate Board data cited by Yonhap and Asia Economy showed apartment prices in Gangnam and Seocho districts falling for eight consecutive weeks after the announcement, while non-Gangnam areas including northern districts continued to rise. Hankook Ilbo reported that listings in the three Gangnam districts — Seocho, Gangnam and Songpa — rose about 21% to 26,829 on Oct. 5 from 22,182 on Aug. 3, citing the platform Asil. Yonhap said listings discounted by 1 billion to more than 2 billion won from previous peaks were increasing in Gangnam, while Asia Economy said some were more than 1 billion won below their highest prices. [ 2 , 5 , 7 ]

Nam Hyuk-woo, a real estate researcher at Woori Bank, told Hankook Ilbo that policy uncertainty over the tax changes, together with higher interest rates, was likely to keep Gangnam transactions slow and prices weak, and that a deeper decline there could slow Seoul's overall price growth because of the district's large share of market value. Yonhap and Maeil Business said the gap between high-end and mid-to-low-priced markets would persist for now, with the National Assembly still to review the tax plan, while Asia Economy noted an expectation that the gap could narrow as discounted Gangnam properties trade. [ 2 , 4 , 5 , 7 ]