Hundreds of millions of dollars in rush sales… I know it’s a transfer tax savings sale
The tax reform plan pending in the National Assembly, the possibility of returning to a bomb
Interested in whether the ransom price will drop further for a quick sale to avoid transfer tax and property tax
In the real estate market in Seoul, a rush sale with a ransom price lower than the previous asking price is appearing. According to the move of the National Assembly, there is an observation that there may be a series of urgent sales with additionally lowered prices in the real estate market.
According to the real transaction price disclosure system of the Ministry of Land, Infrastructure and Transport on the 19th, the 59m2 dedicated to ‘Magok 13 Complex Hillstate Master’ in Magok-dong, Gangseo-gu, Seoul was changed to 980 million won on the 11th. It fell by 400 million won (regarding 29%) from 1.38 billion won in October last year.
The actual transaction price of this apartment is significantly lower than the previous transaction or the recent asking price. The actual transaction price for the same area in May last year was 1.28 billion won, a difference of 300 million won. The asking price for the same area of the complex on the market starts at 1.25 billion won, which is higher than the actual transaction price.
Real estate agents at the forefront agreed that it was difficult to see that the price had simply gone down. An official from a brokerage office in Magok-dong explained, “It was a sale that temporarily expired on the 12th of this month, the period of exempting one-family and two houses.”
An official from another brokerage office nearby said, “It was initially sold at 1.15 billion won, but when it didn’t sell, the price was lowered by the tax that would be paid to become a second-homeowner.”
Suspension of urgent sales that lowered the price by hundreds of millions of won… “For the purpose of saving transfer tax”
The sale price of the same area of the complex sold in 2015 was regarding 430 million won. Assuming that the second home owner, who has owned the house since the time of sale, sells it for 1.3 billion won, similar to the previous transaction price, the capital gains tax to be paid is over 300 million won. On the other hand, if you are recognized as a temporary second-homeowner and receive tax-free benefits, the transfer tax will be reduced to regarding 5 million won. Even if the price drops by hundreds of millions of won, it is beneficial to reduce taxes.
Temporary 2-House Tax Exemption is a system in which a person who temporarily owns two houses, disposes of one house within a certain period of time, is granted a transfer tax-free benefit as a single-family homeowner. Previously, the deadline for disposal was one year, but with the inauguration of the Yun Seok-Yeol government, it was extended to two years through the announcement of the amendment to the Enforcement Decree of the Income Tax Act.
As the temporary two-household tax-exempt disposition period has been extended and house prices have been falling day following day, there are signs of rush sales that have lowered prices by hundreds of millions of won. A 59m2 dedicated to ‘DMC Parkview Xai 2 Complex’ in Namgajwa-dong, Seodaemun-gu was also sold for 900 million won on the 20th of last month. It is more than 100 million won lower than the previous transaction of 10.27 billion won in May or the current market price of 1.05 billion won.
An official from the Namgajwa-dong brokerage office said, “It was a sale that had to be sold quickly ahead of the expiration of the tax exemption period for one-family and two-family homes.” They are for sale that suffers from tax problems.”
The tax savings plan is pending in the National Assembly… “There may be an increase in supply.”
In the midst of this, attention is also being paid to the passage of the 2022 tax reform bill announced by the government last month by the National Assembly. The government has announced that it will apply a special case of excluding the number of houses from the comprehensive real estate tax for temporary two-family houses, inheritance houses, and local low-priced houses this year. It is intended to provide a one-homeowner benefit to temporary two-homeowners, and this year alone, a special tax deduction of 300 million won will be introduced for one homeowner, and the deduction amount will be raised from 1.1 billion won to 1.4 billion won.
The application for special cases is scheduled to begin on the 16th of next month, but the National Assembly has yet to pass related amendments such as the Special Tax Act and the Restriction of Special Taxation Act. The National Tax Service believes that it will be difficult to apply special cases this year if the bill does not pass the minimum standing committee stage by the 20th.
Kim Chang-ki, head of the National Tax Service, said in a report on the National Assembly’s Planning and Finance Committee on the 1st of this month, “It will be possible to smoothly implement the tax exemption and special deduction by the 20th of this month (a resolution of the National Assembly).” It suggests a ‘deadline’ to which special cases can be applied.
If the bill does not pass the National Assembly within the time limit, it is speculated that there may be a sudden sale on the market in order to avoid the tax bomb, in conjunction with the temporary exemption from transfer tax for second-homeowners.
An industry official said, “If special exceptions to the exclusion of the number of houses are not applied, there is a high possibility of being hit by a tax bomb this year as well as next year. There will be,” he said.
He added, “The already lowered prices for quick sale have room for further decline due to the backlog,” he added.
Oh Se-seong, reporter at Hankyung.com sesung@hankyung.com
