The land transaction permitting system, which was chosen during a critical period, is being actively reviewed for repeal." (Jan. 14, 2025, Oh Se-hoon, Mayor of Seoul)
"The designation of land transaction permitting zones for 291 out of 305 apartments located in four buildings near the 'International Exchange Complex' (in Songpa-gu Jamshil-dong and Gangnam-gu Samsung, Daechi, Cheongdam-dong) will be 'immediately' lifted." (Feb. 12, 2025, Seoul City)
"The rate of increase before and after the repeal of the land transaction permitting system for the 305 Jamshil apartments is minimal." (Mar. 9, 2025, Seoul City)
"If the rise in apartment prices after the repeal of the land transaction permitting zone is excessively abnormal, we will consider re-regulating." (Mar. 10, 2025, Oh Se-hoon, Mayor of Seoul)
Oh Se-hoon, the Mayor of Seoul, has caused confusion by mentioning the 're-regulation' of the land transaction permitting system in an official setting. This follows just a month after Seoul City lifted the land transaction permitting system in the Jamshil area of Gangnam on the 12th of the previous month. The comment was a reaction to signs of increased transactions and rising prices in the areas around the lift. This also occurred just one day after Seoul City announced that the 'rise in apartment prices has been minimal' since the repeal of the land transaction permitting system.
According to the Seoul real estate market on the 11th, criticism has arisen regarding comments made by Mayor Oh during a meeting with reporters the previous day, in which he stated, 'If the increase in apartment prices is excessive, we will consider re-regulating.' Although he noted, 'We anticipated the increase to some extent,' concerns have been raised that 'the mayor's remarks are too light' regarding the city's real estate policies.
In an online real estate community, there were strong criticisms stating, 'A market that fluctuates like this is unqualified.' Some suggested, 'Designate Banpo, which has excessively risen,' and 'Since Banpo prices have increased, let's lock it for 5 years,' calling for regions that have experienced rapid price increases to be designated under the land transaction permitting system. Considering that these are unrefined statements made in an anonymous online space, there was sharp criticism directed at Mayor Oh and Seoul City for their hasty and sensitive reactions regarding the 'land transaction permitting system.'
The rise in apartment prices following the repeal of the land transaction permitting system was already anticipated, according to Mayor Oh. Many argue that the original decision to bind a vast area of 14.4 square kilometers under the land transaction permitting system after the creation of the International Exchange Complex was incorrect. They suggest that employing the land transaction permitting system, which was introduced to curb speculation during large-scale residential developments in Seoul in the 1970s, to suppress apartment prices has led to more negative side effects than effectiveness.
The land transaction permitting system is designed to prevent speculative transactions in areas slated for development or where there are concerns about speculation. Under this system, prior approval must be obtained from the head of the district office for transactions of houses, commercial buildings, land, etc., above a certain scale. For dwellings, sales for the purpose of actual residence are only permitted for two years, making it impossible to engage in so-called 'gap investment' where properties are purchased with leases or rent.
Park Hap-soo, a professor at the Konkuk University Graduate School of Real Estate, stated, 'If the land transaction permitting system had not been designated from the start, there would not have been such short-term increases,' adding that it is a representative case of an excessive system with significant side effects, such as infringing on property rights and the freedom of residence.
Academically, it is analyzed that the price suppression effect of the land transaction permitting system is not significant. At a citizen forum hosted by Seoul City in December of last year, Professor Lee Chang-moo from Hanyang University's Department of Urban Engineering presented an analysis of its effectiveness. According to the professor, after the Jamshil area was designated under the land transaction permitting system in June 2020, housing prices in adjacent areas fell by about 9.5% during the initial two years. However, afterward, prices turned to an upward trend, recording an increase of about 4%. While there were stability effects at the beginning of the regulation, these effects have diminished over time.
Professor Lee stated, 'The Seoul City's introduction of the land transaction permitting system for residential areas occurred at a time when the division of shares in single- and multi-family homes in redevelopment zones was rampant,' noting that 'there are no longer extreme investment behaviors like the share division then. Fundamentally, continuously intervening in the market is not right.'
Professor Park emphasized, 'Although the land transaction permitting system remains in place in Apgujeong-dong, Gangnam-gu, the asking price in the second district, where reconstruction is underway, has reached 9 billion won.' He urged that 'Seoul City should focus all efforts on accelerating supply through reconstruction and redevelopment.'
The biggest problem is that the remarks and announcements made by Mayor Oh and Seoul City are causing confusion in the market. After the Korea Real Estate Board and other statistical organizations reported that apartment prices in the Gangnam area, centered around Songpa-gu, are rising following the relaxation of the land transaction permitting system, Seoul City issued a rebuttal on the 9th. Seoul City stated, 'Comparing the actual transaction data before and after the repeal of the land transaction permitting system for 305 Jamshil apartments, the total transaction volume increased from 78 cases before the repeal to 87 cases after, an increase of 9 cases,' adding, 'The transaction volume for the area based on 84 square meters increased from 35 cases before the repeal to 36 cases after, showing a minimal increase, and the average sale price also rose from 2.69 billion won to 2.71 billion won, indicating a minimal rate of increase.' However, the data from Seoul City only surveyed the 22 days before and after the repeal and may not adequately capture the market responses that began following Mayor Oh's remarks in January or the current ongoing market trends.
The following day, Mayor Oh's remarks regarding 're-regulation' fueled the growing criticism. There were also opinions expressing, 'Did those who purchased in the Jamshil area after the repeal of the land transaction permitting system grab the bull by the horns?' Many analysts speculate that as a potential candidate for an early presidential election, Mayor Oh made immature remarks with an awareness of public sentiment. The current rise in apartment prices in Seoul results from not just improved market sentiment after the repeal of the land transaction permitting system but also from complex factors such as the Bank of Korea's interest rate cuts and concerns about supply shortages. It should also be considered that there could be a surge in demand ahead of the third phase of the total debt repayment ratio (DSR) beginning in July.
Yoon Ji-hae, chief researcher at Real Estate R114, commented, 'To loosen regulations and then restore them could really shake the standards of regulation and is a matter that requires great caution,' adding, 'In a situation where there is anxiety about the economy, such remarks could cause confusion in the market, which is concerning.'
A political figure who requested anonymity stated, 'I have doubts about whether those around Mayor Oh possess expertise or political sensitivity,' urging that 'greater caution should be exercised regarding remarks.'