Tax Reform Reversal Leaves Seoul’s Luxury Housing Market Confused and Waiting

The luxury housing market in Seoul’s Gangnam area has entered a state of confusion and watchful waiting after the government partially reversed its tax reform plan. Listings are piling up even as some sellers cut asking prices by billions of won.

Seoul had 67,382 apartment listings as of the previous day, up 11.5% from the day the reform plan was announced. Gangnam-gu recorded the largest increase among the capital’s 25 districts, with listings up 16.3% to 10,996. Listings also rose 16.2% in Seocho-gu and 15.1% in Songpa-gu, both above the Seoul average.

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Although the tax reform plan was partly revised, its basic direction has not changed, so it will be difficult to withdraw the listings.

Listings began appearing after the reform plan raised concerns among elderly single-home owners in Gangnam about higher holding and capital-gains taxes. At an apartment complex in Apgujeong-dong, the asking price for a 198-square-meter unit fell to 8.5 billion won, 700 million won below its previous transaction price in May. An 84-square-meter unit at Acro River Park in Banpo-dong, which reached a record 6.3 billion won in May, now carries an asking price of 5 billion won.

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Because the 150% cap on the tax burden limits the increase in holding taxes, and because further revisions are possible, only a limited number of sellers are likely to withdraw their listings unless they are elderly retirees.

The government’s revised plan, approved by the Cabinet, restored the proposed deduction for nonresident single-home owners from 900 million won to the current 1.2 billion won. It also lowered the cap on tax increases from 200% to 150%. The Democratic Party has said it will seek further relief for nonresidents during parliamentary debate.

An Apgujeong real estate agent said many distressed listings had come from retirees who had lived in expensive apartments for a long time. “Although the tax reform plan was partly revised, its basic direction has not changed, so it will be difficult to withdraw the listings,” the agent said. Buyers are waiting for the reform to be finalized, with market participants watching whether further exemptions or changes to tax rates will alter the balance between sellers and buyers.

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Many buyers are adjusting their purchase timing while waiting for disappointed sellers to put properties on the market after the tax reform plan is finalized.