Seoul reconstruction levies expected to trigger market volatility

The imposition of reconstruction excess profit levies is expected to begin in earnest within the year, starting with the Banpo Hyundai complex in Seocho-gu, Seoul. This marks a significant shift as local authorities prepare to collect these fees, which are calculated by subtracting original property values and construction costs from the current market value.

The uncertainty surrounding these levies has already created a “dual pricing” phenomenon in the real estate market. In the Banpo Raemian Trini One complex, for instance, the sale price for an 84㎡ unit varies by approximately 600 million won depending on whether the seller or the buyer assumes responsibility for the upcoming levy.

While the government previously discussed abolishing these levies, local governments are moving forward with collection procedures to avoid the expiration of the statute of limitations. Experts warn that the burden could lead to a contraction in housing supply, as the increased costs reduce the profitability of reconstruction projects and create complications for multi-homeowners and short-term holders.