Higher capital gains tax on multi-homeowners will resume...grace period ends on the 9th

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[The Financial News] The temporary suspension of the heavier capital gains tax on multi-homeowners will end on the 9th. The measure is seen as an effort to slow the rise in apartment prices in Seoul. Since the government signaled in January that the grace period would end, more apartment listings have entered the market as multi-homeowners lowered asking prices to avoid a heavier tax burden. However, while price gains have narrowed, especially in the three Gangnam districts, some asking prices have recently started to rise again as bargain listings from multi-homeowners in areas such as Songpa District and Seocho District are absorbed.
According to the government and others on the 1st, the current system for heavier capital gains tax on multi-homeowners applies the basic tax rate of 6% to 45% in regulated areas, plus an additional 20 percentage points for two-home owners and 30 percentage points for those who own three or more homes. Including the 10% local income tax, the effective tax rate for owners of three or more homes can rise as high as 82.5%. The system was completed under the Moon Jae-in administration in 2021, but after the Yoon Suk Yeol administration took office, annual enforcement was suspended through revisions to the enforcement decree starting in May 2022. The suspension continued even after the Lee Jae-myung administration came to power following the impeachment crisis.
However, at a New Year press conference on January 21, President Lee Jae Myung reiterated his negative stance on holding homes for speculation or investment and said, "There are also supply measures that encourage people with many homes to put them on the market." The interpretation was that the policy was intended to stabilize prices by prompting multi-homeowners who planned to sell non-owner-occupied homes to list bargain properties at lower asking prices to avoid the heavier capital gains tax, while also increasing supply through existing homes.
As bargain listings from multi-homeowners and owners of one high-priced home began to appear in the market, the pace of apartment price increases in Seoul also slowed. According to KREB's weekly apartment price trend, after Lee announced on X on January 23 that the grace period for the heavier capital gains tax would end, the pace of gains in Seoul apartment sale prices began to narrow and fell to 0.05% by mid-March. In the three Gangnam districts, where many high-priced homes are located, and in Yongsan District, prices turned downward in the fourth week of February.
But according to the weekly apartment price trend for the fourth week of April, Seoul apartment sale prices rose 0.14% from the previous week on average. The increase narrowed by 0.01 percentage point. In the three Gangnam districts, Gangnam District (-0.02%) remained weak for the 10th straight week, but the size of the decline narrowed by 0.04 percentage point from the previous week. Seocho District (0.01%) turned upward for the first time in 10 weeks. Songpa District, which had already turned higher the previous week, rose 0.13%, widening its gain by 0.06 percentage point from the previous week. The recent buying sentiment for bargain listings that started in Songpa District spread to nearby Gangnam and Seocho districts, and as the grace period for the heavier capital gains tax on multi-homeowners neared its end, more bargain listings were absorbed, pushing asking prices slightly higher.
Still, it remains unclear whether multi-homeowners will continue to put properties on the market even after the grace period ends on the 9th. According to real estate big data firm Asil, the number of apartment sale listings in Seoul stood at 57,001 on January 1 this year, but rose steadily from the end of January and even topped 80,000 on March 21, when it reached 80,080. Since then, listings have been declining, and as of that day, the number stood at about 72,300.
junjun@fnnews.com Choi Yong-jun Reporter