Seoul apartment listings up 33% in three months... Will home prices stabilize?

[Financial News] Since the government announced its August 3 tax reform plan, listings of apartments in Seoul have increased by more than 30%, raising questions about whether this will lead to stable home prices. Some say the market needs to be watched more closely, including whether listings are withdrawn next spring, given that five years ago listings temporarily increased as owners sought to avoid tax burdens, then declined again as home price gains widened.
On the 8th, real estate big-data firm Asil said there were 80,528 Seoul apartment listings for sale as of the previous day. That was an increase of 20,119 (33.3%) from 60,409 on August 3, when the government announced its tax reform plan.
Listings increased in all 25 of Seoul’s districts. The three Gangnam districts (Gangnam, Seocho and Songpa) accounted for 38.0% of the total increase, while the other 22 districts accounted for 62.0%.
While listings increased, transactions slowed. According to the Korea Real Estate Board (KREB), 3,915 Seoul apartment sales were reported in September, down 42.4% from 6,796 in the same month last year, based on the date the transactions were reported.
President Lee Jae Myung also noted at a Cabinet meeting on the 3rd that Seoul apartment listings were rising rapidly while transaction volumes were falling, and that actual transaction prices in major areas had also dropped substantially.
However, home prices have been moving in different directions across areas. In KREB’s survey for the first week of November (as of the 2nd), apartment prices fell in Gangnam District (-0.39%), Seocho District (-0.37%) and Songpa District (-0.17%). By contrast, apartment prices across Seoul rose 0.07%, and all 22 districts outside the three Gangnam districts continued to post gains.
Market observers say it remains to be seen whether the current increase in listings will lead to sustained price stability. In the past, listings have also increased ahead of tax hikes, only to decline again as the tax date approached.
In its July 10, 2020 measures, the Moon Jae-in administration raised the top rate of the comprehensive real estate holding tax for multiple-home owners from 3.2% to 6.0% and also increased the capital gains tax surcharge rate. It decided to apply the higher holding tax rate from 2021 and to implement a tougher capital gains tax surcharge from June 1 of the same year to encourage multiple-home owners to put properties on the market.
As a result, listings from owners seeking to avoid tax burdens came onto the market in the spring of 2021. According to Asil’s data, Seoul apartment listings rose 18.4% in just two months, from 40,653 on March 1 that year to 48,152 on May 1.
But listings began to decline in May. They fell 1.5% to 47,410 on May 9 from May 1, and dropped further to 39,084 on August 25. That was an 18.8% decrease from early May.
At the time, analysts said some homeowners gave up on selling and chose to hold onto their properties after it became difficult to pay the remaining balance on a sale before the June 1 tax assessment date.
As listings declined, home price gains widened again. According to KREB’s monthly apartment sale price index, the monthly rate of increase in Seoul apartment prices slowed from 0.67% in February 2021 to 0.49% in March and 0.43% in April. It then rebounded to 0.48% in May and rose further to 0.98% in June.
Home prices themselves did not fall even while listings were increasing; rather, the upward trend strengthened again as listings declined.
Some forecasts suggest that the increase in listings this year could also reach an inflection point around next spring. That is because efforts to sell in order to reduce tax burdens could weaken ahead of next year’s June 1 tax assessment date for the comprehensive real estate holding tax.
However, some say prices could rise again if more homeowners give up on selling as the tax assessment date approaches, reducing the supply of lower-priced listings on the market.

[email protected] Jang Min-kwon Reporter