Gangnam apartment price growth slows after tax reform announcement

The rapid rise in apartment prices in Seoul's affluent Gangnam districts has noticeably slowed, a direct consequence of a recently announced tax reform package aimed at high-value properties. In the first week of August, the price increase rate in Gangnam-gu dropped from 0.07% to 0.01%, while Seocho-gu saw a decrease from 0.05% to 0.02%, and Songpa-gu declined from 0.20% to 0.15%. This slowdown reflects the impact of increased holding taxes on luxury homes.

Nam Hyuk-woo, a real estate researcher at Woori Bank, anticipates that these tax changes will prompt owners of expensive single-family homes to carefully weigh the costs and benefits of selling, holding, or gifting their properties. He expects an increase in property owners in key Gangnam areas deliberating their decisions. This cautious approach from sellers, combined with buyers waiting for potential distressed sales, suggests a period of continued negotiation in the market.

Meanwhile, apartment prices in Seoul's more affordable, mid-priced, and outer-lying areas are still experiencing significant growth, a phenomenon known as 'catching up.' Districts like Jungnang-gu (0.52%), Gangbuk-gu (0.36%), and Gwanak-gu (0.30%) are seeing price hikes, particularly for apartments around 600 million won. This is attributed to consistent demand from single individuals and newlyweds who are less affected by tighter loan limits.

Areas in the mid-price range, such as Seongbuk-gu (0.49%), Seodaemun-gu (0.43%), and Dongdaemun-gu (0.31%), also face tight inventory, supporting price stability. In the 경기 province, areas serving as semiconductor industry hubs, like Seongnam (Bundang, Jungwon, Sujeong), are also witnessing accelerated price increases. Yongin's Giheung district, despite new regulations, continued its upward trend, and Dongtan in Hwaseong also saw a slight increase in its growth rate.

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The tax reform will make high-value homeowners weigh costs and benefits for selling, holding, or gifting, and we expect more owners in key Gangnam areas to deliberate their decisions. The tug-of-war between cautious sellers and buyers waiting for fire sales will likely continue for some time.