Business Suffers After Housing Transaction Report System Becomes Effective

In four districts, such as Kangnam, Kangdong, Sonpagu, and Bundang-gu at Sungnamsi, Kyungki, overall housing business has taken a downward turn in the week after the housing transaction report system became effective.

In addition, there is some confusion, because administration members are not hand in glove with each other. For example, the Ministry of Construction & Transportation investigated a reported price, which was evaluated as “proper price” by the district office, on suspicion of false statements.

According to the Ministry of Construction & Transportation on May 2, just nine housing transaction cases have been reported from April 26 to May 1. This is in contrast with the number of seals of approval before the report system, which were more than 800 cases a month.

Reported housing transactions by district numbered one case in Kangnam, four in Sonpagu, three in Kandongu, and one in Bundang-gu, which were all reported on one day, April 29. There were no reports from April 26 to 28, April 30, and May 1.

A few reports on April 29 were interpreted because of the expected raise (average 6.7 percent) of the standard price of public housing, which is standard of a transfer income tax, and inheritance and donation taxes starting from April 30. As apartment transactions are disappearing, the housing prices of related districts are drastically falling.

Bids for the first development, Jugong Apartments, Kangnam, fell to as much as 20 million won per pyon. The unit price of a 51 pyon development in Abgujungdong fell as well, to 110-120 million won, which is 2.5 million won lower than before.

As housing transactions decrease, inconveniences are on the rise. For example, real users are often unable to move in.

A representative of South Korean construction companies in Dechidong, Kangnam, said, “Because reporting taxes have gone up by as much as millions of won after the reporting system was certified, some transactions have been broken off right before contract signings.”

On the other hand, residents and staff at the district office are troubled over the statement of the Ministry of Construction & Transportation on April 30 that it will investigate two cases, which was evaluated as a “proper price” by the district, on suspicion of false statements.

Cheol-Yong Lee Kwang-Hyun Kim kkh@donga.com lcy@donga.com