Seoul’s Luxury Apartment Sales Take a Hit: Cancellations Spike After Loan Cap!

The percentage of canceled sales for apartments valued over 1 billion KRW ($750,000) in Seoul, Incheon, and Gyeonggi Province has increased since June 27, when the Lee Jae Myung administration imposed a 600 million KRW ($450,000) cap on home-backed loans to curb housing prices.

A report by mobile-based real estate brokerage service Ziptoss reveals that 35 percent of all apartment deals exceeding 1 billion KRW ($750,000) were canceled after the regulation was announced.

The cancellation rate, already substantial at 26.9 percent earlier this year, jumped by more than 8 percentage points following the June 27 loan restrictions.

The report noted that the new policy had the most significant impact on transactions involving apartments priced above 1 billion KRW ($750,000). In contrast, only a quarter of apartment deals worth 500 million KRW ($375,000) or less were scrapped after the policy’s introduction, down from 32.2 percent before the regulation took effect.

Interestingly, apartments priced between 500 million KRW ($375,000) and 1 billion KRW ($750,000) were least affected, with a cancellation rate hovering around 40 percent both before and after the announcement.

In Seoul and its surrounding regions, home to about 26 million people – roughly half of South Korea’s population – a price tag of 1 billion KRW ($750,000) is typically considered the benchmark for high-end apartments. Real estate data shows that as of May, the average price of a high-rise apartment in the greater Seoul area was 770.2 million KRW ($577,650), substantially lower than Seoul’s average of approximately 1.3 billion KRW ($975,000).

South Korea’s tiered acquisition tax system, based on property market value, sees the highest tax bracket kick in at 900 million KRW ($675,000). This factor may be contributing to the recent uptick in cancellations, as buyers grow increasingly cautious about purchasing expensive apartments.

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

This has sparked concerns among potential buyers that purchasing now could result in financial losses, leading many to withdraw from their apartment purchases.