Move-Ins Postponed to Avoid New Tax

Many people expected to move to new apartments in Seoul Gangnam area are postponing their plans in order to avoid the comprehensive real estate taxes that will be strengthened next month.

The comprehensive real estate tax and property tax will be levied based on ownership as of June 1. Hence, this year’s taxes will be exempt if one pays for the apartment and receives ownership after June 1.

In the case of Lotte Castle Classic, located in Seocho-dong, Seoul, residents were supposed to have started moving in late May, but it was delayed to sometime after June 8.

A Lotte Construction official commented, “Residents can move this month, jus as planned, because construction is complete, but the owners’ association requested to postpone the date to early June. I think that the toughened taxes played a role.”

Residents can move to Bangbae I’Park, located in Bangbae-dong, Seocho-gu, starting May 31, but most of them plan to move after June 3.

Adjacent real estate dealers reported, “Currently 46-pyong apartments are being transacted at prices over 1.1 billion won. However if they pay for the apartment before June 1, they have to pay not only property tax, but also comprehensive real estate taxes, and that is why residents are delaying their move.”

As of May 30, only about half of the residents have moved into a multipurpose apartment complex in Seocho-dong, which started accepting residents in late April.

A 58-pyong apartment in this complex costs between 1.35 billion to 1.55 billion won, a hefty tax burden by itself, and it is reported that residents owning more than two residences are hesitant to move, because when added with the other residences, the taxes will be levied exponentially.

An official of the company that constructed the complex commented, “According to the apartment’s standard contract, the residents are supposed to move in before May 29, so even if they move in at a later date, they still have to pay the comprehensive tax. It is the people that do not know about such fact that are deferring their moving.”

In some areas, apartments are slowly coming to the market for sale one by one.

A real estate dealer in Yongin City, Gyeonggi Province, said, “The number of houses for sale is gradually increasing, mainly medium to small apartments between 20 and 30 pyeong. Owners of multiple residences are putting smaller apartments, whose prices rise relatively in small amounts, for sale in order to lessen the burden of comprehensive real estate taxes.”

Another real estate dealer in Yangcheon-gu, Seoul predicted, “Although there aren’t people that will sell their houses immediately due to taxes, with the current trend of housing price increases slowing down, the anxiety of large housing owners has increased. If the housing prices continue to be weak, the number of people wanting to sell houses will probably increase.”

imsoo@donga.com