Apartment prices in Songpa District, centered around Jamsil, have skyrocketed following the lifting of the land transaction permit system. Concerns have arisen that apartment prices in the entire Seoul area might surge as prices in Gangnam and Seocho Districts are also sharply rising. While some criticize the lifting of the system as the cause of the price spike, others point out that it was inappropriate to use the land transaction permit system as a tool to control housing prices in the first place.
According to the Seoul Real Estate Information Plaza on the 10th, a dedicated 84㎡ apartment in Jamsil Els, Songpa District, was traded for 3 billion won on the 26th of last month. This marks the highest price ever. Considering that the same type was traded for 2.88 billion won on the 14th of the same month, it means the record price was shattered in just about two weeks.
There was also a record-high transaction at Samsung Hillstate in Samsung-dong, Gangnam District last month. On the 25th of last month, a dedicated 84㎡ apartment was traded for 3 billion won. In Daechi-dong, a dedicated 84㎡ apartment at Raemian Daechi Palace recorded a price of 4 billion won on the 13th of the same month.
Since the land transaction permit zones in the so-called 'Jam-Sam-Dae-Cheong' areas, including Jamsil-dong in Songpa District and Samsung, Daechi, and Cheongdam-dong in Gangnam District, were lifted on the 12th of last month, landmark apartments in each area have seen record-high transactions. This upward trend has also been reflected in statistics. According to the Korea Real Estate Board, the weekly apartment price increase in Songpa District for the first week of March (as of the 3rd) was 0.68%, the highest rate recorded in 7 years and 1 month since the first week of February 2018 (0.76%). In addition, Gangnam District (0.38% → 0.52%) and Seocho District (0.25% → 0.49%) expanded their price increases, ranking 2nd and 3rd in weekly growth rates. Apartment prices centered around the three districts in Gangnam rose by 0.14%, widening the increase compared to the previous week (0.11%).
Before the lifting of the land transaction permit system, housing prices in the Gangnam area had been breaking records daily, centered around Banpo in Seocho District. A dedicated 84㎡ apartment in Wonbeaili was sold for 6 billion won at the beginning of August last year, and the recent asking price has risen to the 7 billion won range. Apartments that were restricted by the permit system in Daechi-dong, such as Raemian Daechi Palace, were trading in the 3 billion won range, while Jamsil Els and Ricents were at around 2 billion won. It is analyzed that the national investment demand is concentrated in areas like Jamsil and Daechi, which were previously suppressed by the permit system.
A representative from a licensed real estate office in Jamsil-dong said, "Since rumors emerged that the city would lift the land transaction permit system, homeowners have been withdrawing listings or raising their asking prices," adding, "Currently, there aren't as many listings as expected."
Separate from the rising house prices in the areas where the land transaction permit system was lifted, opinions are divided in the market over whether the system effectively controls housing prices. The analysis that "the land transaction permit system has no price stabilization effect" played a significant role in the lifting of the system. At a public forum hosted by the Seoul city government in December last year, Professor Lee Chang-moo from Hanyang University's Department of Urban Engineering noted, "In the case of the land transaction permit system designated near the Global Business Center (GBC), after four years, its effectiveness seems to have faded, making it necessary to discuss the need for its lifting." According to this professor, after the 'Jam-Sam-Dae-Cheong' areas were designated as land transaction permit zones in June 2020, housing prices in adjacent areas fell by about 9.5% during the initial two years. However, the prices then turned upward, recording a rise of about 4%. While the regulation initially had a stabilizing effect on prices, its effectiveness has diminished over time.
The land transaction permit system is designed to prevent speculative transactions in development-planned areas or regions at risk of speculation, requiring prior permission from the district mayor for transactions involving dwellings, commercial properties, or land over a certain scale. For dwellings, only sales for actual residence are permitted for two years, making it impossible to buy a house via so-called "gap investment" by including rental or jeonse. Understanding the background of the implementation of the system reveals its true intention. It was implemented through the 8/8 measures in 1978 and was expanded to the housing market after 2020. Originally created to prevent speculation during a period of skyrocketing land prices, it has since been broadened as a tool to control surging housing prices.
The market acknowledges that housing prices are bouncing back like a spring in areas where they were suppressed for a long time due to the lifting of the land transaction permit system. However, there is a prevailing analysis that the current rise in housing prices cannot solely be attributed to the lifting of regulations. It is now time to acknowledge the complexities of how financial and macroeconomic factors influence housing prices, as well as the limitations of suppressing housing prices through demand management. This is evident from the fact that record-high prices are still being reported in areas that remain tied to the permit system, such as Apgujeong and Yeouido. Last month, a dedicated 182㎡ apartment in Apgujeong-dong, Gangnam District, was traded for 9.6 billion won, an increase of about 2.1 billion won from the previous high. In Yeouido-dong, a dedicated 151㎡ apartment in Daekyo recorded a high price of 3.375 billion won.
Ham Young-jin, head of the real estate research lab at Woori Bank, said, "The rise in housing prices in the Jam-Sam-Dae-Cheong areas is a result of a combination of the lifting of the land transaction permit system, interest rate cuts, and the preference for safe assets such as apartments in Gangnam. The increase in housing prices is influenced by various factors, including interest rates, supply, and consumer sentiment."
Yun Ji-hae, a senior researcher at Real Estate R114, noted, "While the lifting of the land transaction permit system has contributed to improving the restrained sentiment, the more significant factors include the relaxed loan regulations compared to last year, interest rate cuts, a preference for top-quality properties, the transition into peak seasonal periods, and the improvement of policy uncertainties," adding that "the efficacy of the land transaction permit system remains low in terms of price control in addition to its function of managing overall transaction volume, as evidenced by the rising prices in areas still bound by the permit system, such as Apgujeong, Yeouido, Yongsan, Mokdong, and Seongsu."