More deals worth over 1 billion won are being called off, possibly due to expectations of a fall in property values

A view of apartment complexes in Seoul from N Seoul Tower in Namsan, taken on Monday. (Yonhap)
A view of apartment complexes in Seoul from N Seoul Tower in Namsan, taken on Monday. (Yonhap)

The percentage of canceled sales on apartments worth more than 1 billion won ($720,500) in Seoul, Incheon and Gyeonggi Province has increased since June 27, when the Lee Jae Myung administration imposed a 600 million won cap on home-backed loans to rein in housing prices.

According to a report by mobile-based real estate brokerage service Ziptoss, 35 percent of all apartment deals exceeding 1 billion won in this region were canceled after the regulation was announced.

The cancellation rate was already substantial, at 26.9 percent earlier this year, but it rose more than 8 percentage points after the June 27 loan curbs.

The report noted that the biggest impact of the new policy was on transactions involving apartments priced above 1 billion won. By contrast, a quarter of apartment deals worth 500 million won or less were scrapped after the policy’s introduction, down from 32.2 percent before the regulation took effect.

Apartments between 500 million won and 1 billion won were least affected, with a cancellation rate of about 40 percent before and after the announcement

A price tag of 1 billion won is typically considered the benchmark for high-end apartments in Seoul and surrounding regions, home to about 26 million people, roughly half of South Korea’s population. Real estate data shows the average price of a high-rise apartment in the greater Seoul area as of May was 770.2 million won, substantially lower than Seoul’s average of approximately 1.3 billion won.

South Korea imposes varying acquisition taxes based on the property’s market value, with the highest tax bracket starting at 900 million won. As such, the recent uptick in cancellations may reflect growing buyer caution toward purchasing pricey apartments.

Lee Jae-yun, head of Ziptoss, told local media that the loan cap sent a strong signal that housing prices were poised for an adjustment.

This has triggered concerns that buying now could result in a financial loss, prompting more buyers to withdraw from their apartment purchases.


minsikyoon@heraldcorp.com