"The price jumped 30 million won after lunch"... Distress sales snarl holiday homebound traffic

With the government confirming that the temporary suspension of heavy capital gains tax on owners of multiple homes will end in May, both the sales and jeonse markets are being shaken at the same time. As de facto gap investing by first-time homebuyers has become possible, buying inquiries are surging. At the same time, concerns are growing that tenants who cannot exercise their right to request lease renewal could fall into a blind spot.■ More gap-investment purchases... Agencies stay open through Lunar New YearOn January 13, just before the Lunar New Year holiday, tension among buyers hung over an apartment complex in Singil-dong in Yeongdeungpo District, Seoul, instead of a festive mood. After hearing that three groups of buyers were scheduled to view the unit that day, the owner raised the price on the spot by 30 million won. In the end, a buyer who wired the deposit first, without even seeing the home, secured the deal. One prospective buyer said, "In the morning they wouldn't even give me the account number, then two hours before the viewing they suddenly notified me they were raising the price," adding, "I turned around on my way to see the place."
The initial asking price for the 84-square-meter unit was 1.05 billion won, with a jeonse deposit of 350 million won. The tenant's lease expires in September next year, meaning the buyer would need about 700 million won in cash right away. According to agents on the ground, demand from buyers looking to purchase with an existing jeonse tenant in place is moving quickly, after the government announced a supplementary measure allowing buyers to defer their move-in obligation until the current tenant's contract ends.
Buying interest is concentrated on homes priced at 1.5 billion won or less, where buyers can use up to 600 million won in mortgage loans. Inquiries are pouring into areas such as Eomchang-dong in Gangseo District and Gireum New Town in Seongbuk District, Seoul, pushing up asking prices. The price for a 59-square-meter unit at Gireum New Town Prugio Complex 3 has risen from 850 million won to 930 million won. One would-be buyer said, "If I wait for listings to show up online, it feels like I'm already too late, so I've been calling agencies first throughout the holiday," and added, "With so few listings and multiple buyers chasing each one, prices jump in an instant."
Real estate agencies are effectively giving up their holidays. A realtor in Seongbuk District, Seoul, said, "We are getting a flood of requests from buyers who outline their budget and ask us to call them the moment a listing appears," and added, "Some buyers say they can't immediately cover the tenant's deposit but will prepare the funds over the remaining lease period and pay it back then." In Geumho-dong and Haengdang-dong in Seongdong District, and Sindang-dong in Jung District, Seoul, foot traffic is also steady on expectations that more distress sales will hit the market before the tax break ends. Owners of multiple homes are visiting agencies with tax accountants to explore ways to reduce their tax burden, or opting to gift properties below market value, making their calculations increasingly complex. Many in the field expect listings to increase around March.
■ Blind spots in lease renewal rights emerge... Tenants on edgeThe government plans to end the temporary suspension of heavy capital gains tax on owners of multiple homes on May 9. Starting May 10, an additional 20 percentage points will be levied on owners of two homes, and 30 percentage points on those with three or more. Earlier, the government announced a supplementary measure that, on the condition of protecting tenants, allows owners to defer their move-in obligation until the existing tenant's lease expires when selling to a first-time homebuyer.
The problem is that this process could create a "blind spot" in the system of lease renewal rights. The right to request lease renewal allows tenants to demand a one-time, two-year extension of their contract, but it becomes difficult to exercise if the home is sold to a first-time buyer. A realtor at a large complex near Songpa District, Seoul, said, "Now that gap investing is effectively possible again, some tenants may find themselves unable to use their renewal rights," adding, "We are already seeing cases where landlords and tenants are negotiating terms."
Critics warn that tenants who have not yet used their renewal right and still have more than seven months left on their lease could become scapegoats. If the property is sold, they may be forced to prepare to move even if they do not want to. The recent sharp rise in jeonse prices adds to the burden. According to KB Real Estate, the average jeonse price for apartments in Seoul last month was 669.48 million won, up from 571.31 million won in August 2023, marking 30 consecutive months of increases. An industry official said, "It will be hard for many tenants to find a comparable jeonse for the same amount, so we could see cases where they are effectively pushed out."

As conditions change rapidly, some landlords and tenants are reaching compromises in which the landlord pays moving costs, brokerage fees and other related expenses. These payments are typically reported to be around 20 million to 30 million won. However, because there is no legal obligation to do so, the potential for disputes remains.
Experts say additional measures are needed to minimize side effects that may arise as the policy is implemented. Seo Jin-hyung, president of the Korea Real Estate Society, said, "If the current system is implemented as is, some tenants could find themselves in very difficult situations," and added, "We need carefully calibrated measures that protect tenants while also maintaining market stability."
going@fnnews.com Choi Ga-young and Kwon Jun-ho Reporter