Decline of penthouses shows evolution of luxury property

Tower Palace, a luxury residential complex completed in 2002 in Dogok-dong, southern Seoul, was once the crown jewel of luxury apartments in Korea. The 244-square-meter (2,626 square feet) penthouse units on the 61st floor were valued at as much as 4 billion won ($3.5 million).

But time moves on and the Tower Palace has lost its luster to more upscale residential complexes across the city.

When its penthouses first came onto the real estate market in 2003, the official price set by the Ministry of Land, Infrastructure and Transport was 1.8 billion won. In 2007, at the height of the local property market, the penthouses’ prices more than doubled to 4.08 billion won.

A decade later, its official valuation as of Jan. 1 by the government dropped by nearly 1 billion won, or 25 percent, to 3.0 billion won. Similar-sized units at Tower Palace Three, the cousin of Tower Palace that was completed in 2004, saw their prices tumble from 3.92 billion won in 2007 to 2.88 billion won this year.

And yet, over the past 10 years, apartment prices in Seoul rose 18 percent on average. In Gangnam District, southern Seoul, alone, where Tower Palace is located, the average value of an apartment went up 2 percent. Other luxury residential complexes near the Han River stole Tower Palace’s crown.

There are about 1,000 apartment units with sizes around 244-square-meters, accounting for about 0.01 percent of the 9.8 million apartments across the country. Looking at the official valuation set by the government, which is about 70 to 80 percent of market value, of 11 residential complexes in Korea with penthouses of similar size, Hannam The Hill topped the chart.

The official valuation of 244-square-meter penthouses in Hannam The Hill, a three-story luxury apartment complex in Yongsan District, central Seoul, was 5.14 billion won this year, according to data from the transport ministry. This is nearly 1 billion won higher than the runner-up on the list, I-Park in Samseong-dong, which is located in Gangnam District. The 250-square-meter penthouses of I-Park are valued at 4.15 billion won. They have been valued higher than Tower Palace since 2005.

The 241-square-meter penthouses of Galleria Foret in Seongsu-dong, Seongdong District, eastern Seoul, which came onto the market in 2011 and have ranked in the top-three developments in terms of valuation since, are now valued at 3.41 billion won, fourth among the top-five this year.

Bringing Galleria Foret from third last year to fourth this year was Acro Riverpark in Banpo, Seocho District, southern Seoul.

After the complex finished construction last year, the official value of its 234-square-meter penthouses this year came to 3.98 billion won. The Tower Palace penthouse came in fifth after Acro Riverpark and Galleria Foret.

With the emergence of new luxury residential complexes across the city, it is no longer rare to find luxury penthouses in Seoul, which is how Tower Palace lost its competitive edge. In addition, newly built penthouses were superior in quality to Tower Palace.

The penthouses in Hannam The Hill are located on the third floor and yet their valuations catapulted by 67 percent over the past six years. Jeon Kyung-taek, a local real-estate broker, said, “Hannam The Hill is second to none location-wise.”

Other market analysts explain that newly built complexes are preferred these days. “In the luxury penthouse market, newly constructed units are valued highly,” explained Park Won-gap, head researcher for real-estate at KB Kookmin Bank.

Owning a penthouse, however, comes with strings attached, including a sizable comprehensive real-estate holding tax. For Hannam The Hill, given the current official valuation set by the government, a resident in a penthouse would have to cough up about 43 million won in real-estate holding tax annually. For a Tower Palace penthouse owner, the tax amounts to 20 million won.

And the penthouse market in Korea may see some changes soon with new high-rise luxury units coming onto the market. The Acro Seoul Forest by Daelim Industrial, for instance, will have six penthouses on the 49th floor. They are set to go on sale next month.

BY AHN JANG-WON AND HWANG EUI-YOUNG [choi.hyungjo@joongang.co.kr]