Seoul apartment listings surge 33% in three months — will prices follow?

Seoul apartment listings have climbed sharply since the government unveiled its Aug. 3 tax reform package, raising questions about whether the supply increase will bring prices down.

Data from real estate big data firm Asil showed that as of Saturday, Seoul had 80,528 apartment units listed for sale across its 25 districts — up 20,119 units, or 33.3%, from the 60,409 listed on the day the Aug. 3 tax reform plan was announced.

All 25 districts in Seoul recorded an increase in listings over the period.

The three Gangnam-area districts — Gangnam-gu, Seocho-gu and Songpa-gu — accounted for 38.0 percent of total listings, with the remaining 22 districts making up 62.0 percent.

Transaction volumes, however, have fallen. According to the Korea Real Estate Board, Seoul apartment sales in September totaled 3,915 transactions based on registration date, a 42.4 percent drop from 6,796 in the same month last year.

Price trends are diverging by area. The Korea Real Estate Board's survey for the first week of November (based on Nov. 2 data) showed apartment prices falling in Gangnam-gu (down 0.39 percent), Seocho-gu (down 0.37 percent) and Songpa-gu (down 0.17 percent), while Seoul as a whole edged up 0.07 percent.

Some observers are drawing parallels to events five years ago. The Moon Jae-in administration announced its July 10 measures, which raised the top comprehensive real estate tax rate for multi-home owners from 3.2 percent to 6.0 percent — effective the following year, 2021 — and also increased the capital gains tax surcharge rate.

In the spring of 2021, listings were observed to have risen as owners moved to sell ahead of the new tax burden.

According to Asil, Seoul apartment listings grew 18.4 percent in two months, from 40,653 units on March 1, 2021, to 48,152 on May 1 of that year.

Listings began to decline from May of that year, however — one month before the comprehensive real estate tax assessment date and the tightened capital gains surcharge took effect.

Analysts at the time attributed the reversal to some owners abandoning plans to sell after it became difficult to complete transactions before the tax assessment date, choosing instead to hold onto their properties.

The pace of home price gains, which had slowed during that period, subsequently picked back up.

The Korea Real Estate Board's monthly apartment sale price index showed Seoul's apartment price growth rate easing from 0.67 percent in February 2021 to 0.49 percent in March and 0.43 percent in April, before climbing back to 0.48 percent in May and 0.98 percent in June.

Prices did not fall while listings were rising — the rate of increase merely slowed — and once listings contracted, price gains accelerated again.

Drawing on that historical pattern, some analysts say whether this year's listing surge will have a lasting effect remains to be seen until next spring.

The concern is that the current wave of selling, driven by owners seeking to reduce their tax burden, could lose momentum ahead of the June 1, 2027, comprehensive real estate tax assessment date.

Others suggest that some owners of high-value homes feeling the weight of the tax bill may move to sell early in the new year — factoring in the time needed from contract signing to final payment — in order to complete transactions before the assessment date.