Seoul real estate analysts expect a shift in buyer demand toward mid-price homes following a tax reform targeting ultra-luxury properties [1].
This shift matters because it could sustain price instability in the mid- and low-price housing sectors, potentially offsetting the intended cooling effect of the luxury tax. As buyers migrate away from the most expensive properties, the resulting pressure may inflate costs for a broader segment of the market.
Demand is expected to concentrate on properties priced between 20 billion and 30 billion KRW [1]. Under the new tax reform, the property-tax burden on ultra-high-price homes is reduced, which makes the relative tax impact on these mid-range houses small [1].
Local experts suggest that the current market is in a waiting period. Kwon Hyo-ju, a certified realtor in Seongdong-gu, said that since the area's prices are around 20 to 30 billion KRW, the comprehensive real estate tax burden is either similar or only slightly higher, meaning there will be no great blow [1].
Kwon said that because there is a grace period for the reform, people are currently watching the atmosphere [1].
This market dynamic is further complicated by a shrinking supply of rental properties. As rental availability drops and rents rise, it creates a cycle that may push more residents to purchase mid-range homes to avoid rising monthly costs [1]. This trend is particularly evident in high-demand areas like Seongdong-gu and the Gangnam district [1].
Industry observers note that while the government aimed to curb the ultra-luxury market, the redistribution of demand may simply move the price pressure down the ladder. The combination of minimal tax increases for mid-tier homes, and rising rents, makes these properties more attractive to those who cannot afford ultra-luxury estates but wish to avoid the rental market [1].
“Demand is expected to concentrate on properties priced between 20 billion and 30 billion KRW.”
The potential shift in demand suggests that tax reforms targeting the top tier of the real estate market can create a 'balloon effect,' where price pressure is simply displaced to the next most affordable bracket. By reducing the tax gap between ultra-luxury and mid-range homes, the government may inadvertently incentivize a surge in buying for properties in the 20-30 billion KRW range, keeping Seoul's overall housing market volatile.
