As the government announced a comprehensive real estate plan that expands regulated areas to all of Seoul and parts of Gyeonggi Province and strengthens loan curbs, the ruling Democratic Party of Korea took a cautious stance, saying it was "an inevitable step to cut off signs of market overheating at an early stage." Still, there are concerns that political burdens could grow if backlash spreads among middle-class residents and end users in the Seoul metropolitan area ahead of next year's local elections.
On the 15th, after the government unveiled its third real estate policy since the launch of the Lee Jae-myung administration, the opposition immediately unleashed sharp criticism such as "martial law for the real estate market" and a "declaration of Real Estate Moon Jae-in Administration 2.0."
People Power Party leader Jang Dong-hyeok said at an emergency news conference, "By reducing the mortgage loan-to-value ratio, the path to homeownership for real demand such as young people, low-income earners, and newlyweds has been blocked," criticizing it as "a policy that ruins home prices." Reform Party leader Lee Jun-seok also said, "With its real estate policy, the Lee Jae-myung administration has declared Moon Jae-in Administration 2.0," pointing out that "a tax- and regulation-heavy real estate policy is starting again."
The Democratic Party leadership maintained a cautious mode. Policy Committee Chair Han Jeong-ae mentioned key elements of the plan on Facebook and only wrote, "The previously announced plan to expand the supply of dwellings will finalize its detailed implementation roadmap by the end of the year," and "More affordable, high-quality public dwellings will continue to be supplied."
Floor spokesperson Kim Hyeon-jeong pushed back in a commentary against the opposition's "real estate martial law" offensive, saying, "They were silent on Yoon Suk-yeol's 'real martial law' but bandy about 'martial law' for livelihood policies," and, "What is needed now is to deflate the speculative bubble, not to play 'hot potato' with more debt."
Meeting with reporters, the floor spokesperson Kim said, "We analyzed the issues that have arisen so far comprehensively and presented countermeasures. We will closely monitor market reactions going forward and continue our review," adding, "The announced policies will be effective."
While backing the government's policies, the Democratic Party is closely watching the direction of public sentiment in the Seoul metropolitan area, where "real estate fatigue" has accumulated. At the high-level party-government consultation on the 12th, the ruling party was also reported to have expressed concern about side effects if regulated areas were expanded to all of Seoul. This is because, with only about eight months left until next year's local elections, tougher regulations could boomerang. However, the party is said to have accepted the government's stance that it would "preemptively block the spread of the balloon effect."
Voices of concern also emerged within the ruling party. Rep. Jang Cheol-min (Dong District, Daejeon) wrote on Facebook, "Today's real estate policy reflects the Lee Jae-myung administration's anguish and sincerity," but added, "Simply continuing to suppress the desire to live in good places and good homes cannot stabilize the market in the long run. If we forcibly hold down prices of high-priced dwellings in well-serviced areas, the policy could end up helping the wealthy buy better homes for less."
Still, within the party, the prevailing mood is that "stabilizing home prices comes first, even if we have to endure criticism." One lawmaker from the Seoul metropolitan area said, "It is entirely predictable to hear criticism that young people and the low-income class can no longer buy homes in Seoul," but added, "From the government's perspective, the focus seems to be more on stabilizing home prices. When home prices are stable, it benefits the public as a whole, so we need to accept a certain amount of such criticism." The lawmaker also said, "Financial approaches have been the most effective in real estate measures. I see it as an unavoidable choice."
A non-capital-area lawmaker also said, "I do think the current regulations are fairly strong, but in reality home prices are rising a lot, so anything less than this level of measures will not rein them in," adding, "Unless we go as far as a land transaction permit system, we will inevitably hear that this has become Moon Jae-in Administration season 2, so there is great fear in the party as well."
The ruling party is refraining from making public statements, but internally it is likely to struggle to find a balance between "stabilizing home prices" and "election strategy." For now, the debate over revising real estate taxation is seen as key.
As it rolled out the regulatory package that day, the government hinted at the possibility of adjusting holding taxes such as the comprehensive real estate tax and the property tax. Until now it had approached tax hikes cautiously, but this is read as a signal that it will consider additional options if the market's overheating does not subside despite tough regulations.
As a presidential candidate, the president had said, "Rather than suppressing demand through taxes, we will stabilize prices by increasing supply." However, this time the government effectively shifted to a stance that "if necessary, tax adjustments can also be considered."
On this, a Democratic Party lawmaker on the National Assembly's Strategy and Finance Committee said, "The deputy prime minister for the economy had also spoken to the effect that the tax card could be considered a last resort," adding, "Since the government has not presented a concrete proposal, there has been no discussion within the committee yet. It is an issue for a final judgment."
Meanwhile, under the government's plan, a total of 27 areas were designated as areas subject to adjustment, overheated speculation districts, and land transaction permit zones, including all 25 districts of Seoul and 12 locations in Gyeonggi Province south of the Han River, along with the previously regulated Gangnam's three districts and Yongsan District. Through next year, all of these areas will be grouped as land transaction permit zones. In regulated areas, the loan-to-value ratio (LTV) for first-time buyers with no homes will be tightened from the previous 70% to 40%, and the mortgage loan cap will be limited to 400 million won for dwellings priced over 1.5 billion won on a market basis and 200 million won for dwellings over 2.5 billion won.