Rich Koreans Have No Intention of Selling Multiple Homes

Most rich Koreans have no intention of selling their multiple homes even though the government is slapping punitive taxes on them, a straw poll suggests.

The Chosun Ilbo asked 50 private-banking clients of Korea's top five banks whether they want to sell their real estate, and 43 said no. That could mean that yet another round of punitive measures announced earlier this month could be as ineffective in curbing real-estate speculation and taming prices as all previous ones.

The respondents own an average of W15.8 billion in assets and are 55 years old (US$1=W1,188). Each owns an average of 1.8 homes each, and 21 live in the flash Gangnam area of southern Seoul.

Most respondents believe the government's policies cannot tame soaring apartment prices in the capital. They cited the shortage of available apartments as the biggest reason, followed by shoddy planning.

One man in his 40s said, "Apartment prices may decline over the short term, but this could become an opportunity for those with ample cash reserves." Another in his 60s said, "It was naïve of the government to think that multiple-home owners will immediately sell their homes if the tax burden rises. Taxes could become a burden, but multiple-home owners will ride out the storm in the firm belief that prices will eventually rise again."

Asked if their tax burden has increased, 41 said yes, and some even said it has doubled. But rather than selling their homes to pay for it, they said they will come up with the money by tapping into their retirement savings or raising the rent.

They agree that the government's real-estate and taxation policies go against market principles. The man in his 60s said, "It's human nature to want to own things, that's what powers capitalism, yet the government seeks to limit this through punitive taxes."

Another man in his 50s said, "I feel like I've become an ATM for tax collectors." 

Prof. Kwon Dae-jung at Myongji University said, "It's only natural for multiple-home owners to resist selling their properties because house prices are rising faster than taxes. The increased tax burden will just be passed on to tenants."

Meanwhile, 23 of the respondents want to transfer their assets abroad, with 18 of them seeking to buy stocks overseas, 13 foreign real estate and 12 U.S. dollars.

The threat of capital flight is backed by other statistics. According to the Bank of Korea, Koreans transferred US$142.1 million overseas to buy real estate in the first quarter of this year, up a whopping 22 percent on-year.