With the government opening an additional exit route to induce multi-homeowners to list properties, the number of Seoul apartment listings is expected to increase. The government decided to grant a capital gains tax heavy taxation exclusion benefit as long as a land transaction permit is applied for by May 9, giving multi-homeowners another chance to sell apartments. However, as many multi-homeowners appear to have already decided to hold or gift rather than sell, a sharp increase in listings is not expected.
Real estate-related ministries and agencies, including the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport, and the Financial Services Commission, said on the 9th they would exclude the application of the heavy taxation deferral for capital gains tax on multi-homeowners in regulated areas if they apply for a land transaction permit by the 9th of next month, when the deferral ends. With this measure, the deadline for multi-homeowners to sell homes has been extended by just over three weeks. Previously, they had to conclude a sales contract after obtaining a land transaction permit, so they had to sell their homes by the middle of this month at the latest.
The government's decision appears aimed at giving multi-homeowners willing to sell more time to bring as many listings to the market as possible. After the decision to end the capital gains tax heavy taxation deferral, a large number of multi-homeowner listings flooded the market, but the recent increase has entered a lull. As a result, the decline in home prices that had continued mainly in the Gangnam area has somewhat paused, and with signs of price increases in some Han River belt districts, the government appears to have given multi-homeowners another chance to sell.
Seoul apartment listings have been declining since surpassing 80,000 on the 21st on the 21st. Prices also still have room to turn upward. According to the Korea Real Estate Board (REB), Seoul apartment prices in the first week of Apr. rose 0.10% from the previous week, extending gains. Seocho District (-0.02%→-0.06%) and Songpa District (-0.01%→-0.02%) fell slightly, but Gangnam District (-0.22%→-0.10%) saw a narrower decline. Seongdong District (-0.02%→0.04%) and Gangdong District (0.00%→0.01%) turned to increases.
With this measure, the market expects an increase in listings from multi-homeowners. In fact, after President Lee Jae-myung said on the 6th, "While keeping the deadline of May 9, the end date of the capital gains heavy taxation deferral, how about allowing cases that apply for a permit by May 9," Seoul apartment listings increased. According to real estate big data firm Asil, Seoul apartment listings rose from 75,501 on the 6th to 76,631 on the day, up 1,130 (1.4%).
However, the pace of increase in listings is likely to be more limited than when the first remarks about ending the multi-homeowner capital gains tax deferral emerged. There is already a perception in the market that "everyone who would sell has sold." Experts say most of the multi-homeowner properties that have not been sold so far have chosen gifting or holding. In fact, last month in Seoul, gifts of collective buildings such as apartments and officetels totaled 1,382, the highest in three years.
Lee Eun-hyeong, a research fellow at the Construction & Economy Research Institute of Korea, said, "Because the policy goal is to induce sales by multi-homeowners, not to impose a penalty for missing the date, this is an appropriate complementary measure," adding, "Since it effectively extends the end date of the deferral, there is room for additional market listings by that amount." Even so, Lee added, "It is difficult to see this measure leading to dramatic market changes," and "Because it applies to the limited group of so-called multi-homeowners, its impact should be seen as limited."
Kim In-man, head of the Kim In-man Real Estate Economy Research Institute, said, "Multi-homeowners who had to sell already disposed of dwellings as quick sales in February to March," explaining, "Multi-homeowners remaining in the market now are those who can sell or not sell, so they are not in a desperate situation, and because this is not a trend-like decline, they judged that holding is advantageous."
Some also note that the government's decision could push the market into a wait-and-see mode, causing the side effect of making transactions even harder. Kim said, "On the ground, there were cases where, with only a week left until the end of the capital gains heavy taxation deferral, deals were to be concluded even at lower prices, but with this decision creating more time, some homeowners are holding out on price adjustments and deals are falling apart."