After taxes cut, property in Gangnam feels a boost

A 40-year-old property owner recently received several messages from his realtor saying there are potential buyers interested in his small apartment in Gaepo-dong, southern Seoul.

“In the past couple of years, although I received several enquiries about jeonse [lump-sum deposit rentals], I hardly had any calls about customers interested in making an actual purchase,” the owner said. “I guess things are finally turning around for the real estate market.”

According to the Seoul government yesterday, more than 1,200 apartments were sold in the first 10 days of 2014. That was more than the 1,134 apartments that were traded during the entire month of January 2013.

The Nowon, Gangnam and Songpa districts saw the most transactions among neighborhoods in Seoul.

These neighborhoods are known to have a substantial number of small and midsize apartments, as well as apartment complexes that have been waiting for approvals for reconstruction and redevelopment.

The movement in the market comes after capital gains taxes were lowered. A few hours ahead of the start of the new year, the National Assembly approved the abolishing of higher capital gains taxes on apartment sales.

In 2003, when the real estate market was overheating, the Roh Moo-hyun administration raised the capital gains tax in order to cool it off. As a result, a 50 percent to 60 percent capital gains tax was imposed on sellers who owned multiple properties.

The real estate market quickly slumped after the global financial crisis in 2008. The special capital gains tax was one of the major obstacles to recovery for the market.

Along with a permanent lowering of the acquisition tax implemented last year, many have expected the real estate market to show signs of recovery.

The price of apartments has already started to go up.

Real estate information provider Budongsan 114 reports that the prices of apartments in Seoul rose this week. Most of the increases were in the three major Gangnam areas awaiting redevelopment approvals.

For example, apartments in a complex in Songpa, southeastern Seoul, which have been awaiting redevelopment approval, saw their value increase 5 million won ($4,700) last week. In general, Songpa’s apartments rose 0.07 percent, followed by 0.06 percent in Gangnam and 0.05 percent in Seocho.

Small apartments were popular last week. An 85-square-meter (101.7-square-yard) apartment in Jung District, central Seoul, saw its value rise 7.5 million won.

“The impact of the lifting of regulations has started to appear in Gangnam,” said Lee Mi-yoon, an analyst at Bundang 114’s research center.

BY LEE HO-JEONG [ojlee82@joongang.co.kr]