Seoul apartment listings up 33% in three months… Will this lead to stabilization of housing prices?

Since the announcement of the tax reform plan on August 3, apartment listings in Seoul have increased by 33%, but attention is being paid to whether the increase in listings will lead to continued stabilization of housing prices.

Since the increase in house prices five years ago has decreased after the number of listings increased ahead of the strengthening of the tax system, it is pointed out that we need to take a closer look at market trends, such as whether listings will be recovered next spring.

◇ After the 8/3 tax reform plan, the price of properties for sale in Seoul increased by 33%… Price decline in Gangnam 3 districts

On the 8th, real estate big data company Asil analyzed the volume of apartment sales in each of Seoul's 25 autonomous districts and found that the number of apartments for sale in Seoul the previous day was 80,528.

This is an increase of 20,119 cases (33.3%) from the 60,409 cases on August 3, when the government announced the tax reform plan.

During this period, the number of properties for sale increased in all 25 autonomous districts of Seoul. Among the increase, properties for sale in the three Gangnam districts (Gangnam, Seocho, and Songpa) accounted for 38.0%, and the remaining 22 districts accounted for 62.0%.

Trading volume decreased.

According to the Korea Real Estate Agency, the volume of apartment sales in Seoul last September was 3,915 as of the reporting date, a 42.4% decrease from the same month last year (6,796).

President Lee Jae-myung mentioned at the Cabinet meeting on the 3rd that the number of apartments for sale in Seoul is rapidly increasing and transaction volume is decreasing, and that actual transaction prices in major regions are also dropping significantly.

Actual price trends vary by region.

According to a survey conducted by the Korea Real Estate Board in the first week of November (as of the 2nd), apartment prices in Gangnam-gu (-0.39%), Seocho-gu (-0.37%), and Songpa-gu (-0.17%) fell, but in Seoul as a whole, they rose by 0.07%. Except for Gangnam 3-gu, the remaining 22 autonomous districts all maintained an upward trend.

◇ In 2021, the number of listings for sale increased ahead of taxation, but decreased in May.

A similar situation occurred 5 years ago.

On July 10, 2020, the Moon Jae-in administration announced the '7/10 Measures' to raise the highest comprehensive real estate tax rate for multiple homeowners from 3.2% to 6.0% and also increase the heavy capital gains tax rate.

The comprehensive real estate tax rate increase has been decided to take effect from 2021. However, in order to encourage multiple homeowners to put up properties for sale, the increased transfer tax was decided to take effect from June 1 of that year.

In fact, in the spring of 2021, the number of properties for sale that were interpreted as being for pre-tax disposal increased.

According to Asil statistics, apartment listings in Seoul increased by 18.4% over two months, from 40,653 on March 1, 2021 to 48,152 on May 1.

However, in May, a month before the comprehensive real estate tax base date and the implementation of stronger transfer taxes, the number of properties for sale turned to decline. On the 9th of the same month, the number of apartments for sale in Seoul was 47,410, down 1.5% from May 1. Afterwards, on August 25th, the number was 39,084, a decrease of 18.8% from early May.

At the time, there was an analysis that some homeowners were giving up selling and turning to holding as it became difficult to pay the balance before the tax base date.

Along with the increase in listings, the rate of house price growth, which had slowed, also increased again.

According to the Korea Real Estate Agency's monthly apartment sale price index, the growth rate of apartment prices in Seoul in 2021 decreased from 0.67% in February to 0.49% in March and 0.43% in April.

However, the increase increased to 0.48% in May and to 0.98% in June. Even during the period when the number of items for sale increased, the price did not fall but only slowed down the rate of increase, and after the number of items for sale decreased, the amount of increase increased again.

◇ Market situation variables next spring… “We need to reduce market anxiety by increasing supply confidence.”

There is speculation in the market that the increased number of listings this year could also reach an inflection point around spring next year.

The selling movement to reduce the tax burden may weaken ahead of the comprehensive real estate tax base date on June 1st next year.

Park Hap-soo, an adjunct professor at Konkuk University's Graduate School of Real Estate, predicted that if the tax reform plan is confirmed, some selling may occur from January to March next year as uncertainty about the tax burden is resolved.

Some owners of expensive homes who feel the burden of paying taxes may start selling early in the year in order to dispose of them before the tax base date, considering the time it takes from contract to payment of the balance.

However, if homeowners who gave up on pre-tax disposal take back their properties, there is a possibility that prices will rise again as the number of low-priced properties decreases.

Regarding the market trend next spring, Professor Park predicted that a similar trend could occur in 2021 when comprehensive real estate taxes were strengthened, saying, "There is room for goods to be recalled or prices to rise in April."

In the real estate market, there are suggestions that we should look not only at the decline in prices in the Gangnam area, but also at mid- to low-priced housing and the housing situation of tenants.

Some point out that in order to continue to stabilize the market, it is necessary to expand supply and provide specific information to lower buyers' anxiety.

A real estate market official said, "We need to increase trust in supply by regularly promoting the progress of projects such as compensation, construction start, and sales for each public housing site." He added, "If the location and schedule of houses to be supplied in the future are known, the demand to buy a house in a hurry can be converted into demand waiting for subscription."