Sixty Percent of Gangnam Apartment Owners Have More Than Three Homes

It was found that six out of ten owners of apartments in the Gangnam area, an area in which prices have surged recently, own more than three houses.

Suspecting that speculative investments have driven up housing prices, the National Tax Service decided to mobilize 9,700 people to find out if 180,750 households who own more than three houses nationwide have evaded tax when they sold or bought the houses.

It plans to launch a tax audit on individuals, their families and people or companies involved in the transaction when they are found to have engaged in speculative investment.

The National Tax Service announced on July 1 that the survey of nine apartment complexes (five in Gangnam, one in Seocho, one in Songpa and two in Gangdong) indicated that 15,761, or 58.8 percent, of all 26,821 apartments traded were bought by people who own more than three houses. These apartment complexes have recorded the highest increase in prices from 2000 to the end of June of this year.

The average prices of apartments surveyed jumped 2.8 times (688 million won, on average) from 377 million won in January 2000 to 1.07 billion won in June 2005.

Lee Ju-sung, administrator of the National Tax Service, ordered research directors of local tax offices to “investigate thoroughly to find out if these owners of more than three houses evaded any taxes in the process of buying or selling houses” at the meeting on July 1.

Lee added, “It is expected that the tax audit can encourage owners of more than one house to sell their property, resulting in the increased supply in the market.”

The National Tax Service said that if any of 180,750 households who own more than three houses nationwide is found to have made speculative investment, further investigation would be launched that would include: the identification of the sources of funds for individuals and families, a tax audit on companies involved, investigations regarding illegal inheritance, and donations and illegal appropriation of the profits made from tax evasion.

Jae-Seong Hwang jsonhng@donga.com