Seoul apartment land-transaction permit applications halve from April peak as price gains slow

The number of land-transaction permit applications for Seoul apartments fell for a third consecutive month in July, while the rate of price increases among applicants slowed from 2.67 percent to 1.41 percent over the same period. The steepest declines came from the three Gangnam districts and Yongsan-gu, while mid- to lower-priced apartments in Gangbuk and southwest Seoul continued to see relatively strong price gains.

The Seoul Metropolitan Government said Friday that 4,681 new land-transaction permit applications were filed for Seoul apartments in July — down 47.5 percent from the April peak of 8,911 and 11.7 percent below June's 5,304.

Applications have declined for three straight months since peaking at 8,911 in April, falling to 6,021 in May, 5,304 in June and 4,681 in July. The city attributed the trend to a combination of factors: a rush of "last-chance" transactions in April and May ahead of the expiration of the capital gains tax surcharge exemption for multi-home owners, followed by a supply freeze and a wait-and-see stance among both buyers and sellers ahead of the Aug. 3 tax reform package announcement.

The daily average number of applications in July fell to 212.8, down 15.8 percent from June's 252.6 and the lowest level recorded this year. Since the citywide land-transaction permit system took effect in October last year, cumulative applications through the end of July reached 53,114, of which 51,698 — or 97.3 percent — have been processed.

Applications fell across all zones. The three Gangnam districts and Yongsan-gu recorded the sharpest drop, declining 21.6 percent from 691 in June to 542 in July. Their share of total applications also slipped 1.4 percentage points, from 13.0 percent to 11.6 percent.

Applications in the seven Han River belt districts fell 11.6 percent, from 1,168 to 1,033; the 10 Gangbuk districts dropped 10.8 percent, from 2,450 to 2,185; and the four southwest Seoul districts declined 7.4 percent, from 995 to 921. By share of total applications, Gangbuk led at 46.7 percent, followed by the Han River belt at 22.1 percent, southwest Seoul at 19.7 percent, and the three Gangnam districts and Yongsan-gu at 11.6 percent.

The city said the wait-and-see mood ahead of lending restrictions and the tax reform announcement weighed more heavily on the three Gangnam districts and Yongsan-gu, where high-priced housing is concentrated. In Gangbuk and southwest Seoul, by contrast, end-user demand from households without homes and newlywed couples continued to drive transactions, centered on apartments priced around 600 million won ($424,000) that are eligible for policy-backed loans. The city also noted that a shortage of rental listings had pushed some tenants to shift from renting to buying.

Applications for owner-occupancy requirement exemptions on properties with existing tenants also declined. July saw 211 such applications, accounting for 4.5 percent of all land-transaction permit applications — down 23.6 percent from 276 in June, with the share of total applications falling from 5.2 percent to 4.5 percent.

By zone, the 10 Gangbuk districts filed the most owner-occupancy exemption applications at 96, followed by the seven Han River belt districts at 53, and the three Gangnam districts and Yongsan-gu and the four southwest Seoul districts at 31 each. The city said the government's temporary policy to expand the scope of owner-occupancy requirement exemptions in land-transaction permit zones has so far had limited impact on the real estate market.

Price gains also moderated. The average application price for Seoul apartments in July rose 1.41 percent from the previous month, down 1.26 percentage points from June's 2.67 percent increase. The city said the slowdown reflected the fading of transaction distortions caused by the expiration of the capital gains tax surcharge exemption, with activity increasingly driven by end-user demand amid tighter lending restrictions.

Regional divergence was pronounced. The three Gangnam districts and Yongsan-gu rose just 0.38 percent from the previous month, and the seven Han River belt districts gained 0.63 percent. The 10 Gangbuk districts and the four southwest Seoul districts posted comparatively stronger gains of 1.78 percent and 2.29 percent, respectively.

The city attributed the stronger price performance in Gangbuk and southwest Seoul to sustained end-user buying of mid- to lower-priced apartments amid lending restrictions. In the three Gangnam districts and Yongsan-gu, the city said, a wave of distressed listings that emerged after the capital gains tax surcharge resumed had largely been absorbed, leaving ordinary transactions to drive the market and tempering price gains.

The city said the full market impact of the tax reform package announced Aug. 3 would become more apparent in land-transaction permit application data from August onward. As the timeline and scope of the measures could change as the package moves through National Assembly deliberations and finalization, the city said it plans to continue monitoring application and processing volumes, application prices, and zone-by-zone trends.