Seoul Mayor Oh Se-hoon noted on the 19th that the surge in housing prices following the lifting of the land transaction permit system (land permit system) in the Jam-Sam-Dae-Cheong area (Jamsil, Samsung, Daechi, Cheongdam) is a 'painful mistake.'
During a briefing on housing market stabilization measures held after a meeting with real estate-related agencies at the Seoul Government Complex in Jongno District, Mayor Oh said, "The phenomenon of skyrocketing prices, especially in the three districts of Gangnam, is truly painful to think about as we lifted the land permit system in the name of deregulation."
On the same day, the Ministry of Land, Infrastructure and Transport and the city of Seoul immediately designated the three districts of Gangnam (Gangnam, Seocho, Songpa) and Yongsan as land transaction permit zones. Following a noticeable rise in house prices after lifting the land transaction permit system for the Jam-Sam-Dae-Cheong area on the 12th of last month, they restored regulations for the region and expanded the areas where the land permit system is applicable. Consequently, all 2,200 apartment complexes, approximately 400,000 dwellings, located in the Gangnam districts and Yongsan will be designated as land transaction permit zones for six months.
Mayor Oh expressed concern about restoring regulations and expanding designations just a month after lifting the land permit system, stating, "The number of reported cases in the three districts of Gangnam has increased, and transactions suspected of being speculative, including gap investments, have surged. If we do not control the volatility in the real estate market early on, there is a strong possibility that more transactions will burst. Therefore, we are taking this as an opportunity to expand the land permit system, which was previously limited to certain areas of Gangnam."
The following is a Q&A session with Mayor Oh and Minister Park Sang-woo regarding the housing market stabilization measures.
─What is the reason for expanding the land permit system beyond the Jam-Sam-Dae-Cheong to include areas such as Yongsan?
Mayor Oh said, "If we do not address the volatility in the real estate market early, there is a possibility of abnormal transactions occurring. That is why we designated more areas than originally bundled. Usually, the designation period is one year, but we are limiting it to six months to monitor the situation closely. Once the market stabilizes, we will take corresponding actions."
─Was there a necessity to apply the land permit system throughout the entire Yongsan district? Could it cause adverse effects on economic contraction? I wonder if it won't be too late to make additional announcements regarding hot spots like Mapo, Seongdong, and Gangdong as the situation evolves.
Minister Park said, "When analyzing total transaction volume and the speed of transaction increase, the proportion of transactions by non-residents has rapidly increased. There has been a significant rise in gap investments where people buy with leaseholds for investment purposes. With interest rates down and given the certain expectation of additional rate cuts considering the macroeconomic situation, the likelihood of transactions increasing was a basis for expansion. Currently, while there are unsold homes in provincial areas, popular areas in Seoul are not seeing price declines, causing imbalances to deepen, which led us to take preemptive measures. If necessary, we will expand the measures. The government cannot allow the phenomenon of only certain popular areas seeing price increases. Please see this as a preemptive and prompt action."
Mayor Oh stated, "Our principle is that Seoul should fully supply dwellings and stabilize prices downward to prevent the widening of the asset gap. We are making significant efforts to achieve that goal again. In the future, if any regions benefit from the balloon effect of this land permit designation, we are prepared to apply additional regulations for price stability."
─What is the reason for temporarily designating the land transaction permit zones for six months?
Mayor Oh said, "After much deliberation on whether to designate the land transaction permit zone for three or six months, we concluded that it is reasonable to initially designate it for six months and then determine whether to reassess or extend the duration based on observation. Conditions may vary depending on market situations. While the three districts of Gangnam and Yongsan are the targets, we are monitoring other regions as well. I will not mention specific areas. If volatility arises from the balloon effect, we can designate additional regulations."
─After the lifting of the land permit system, a learning effect has emerged. Could similar phenomena occur when the land permit system is lifted again in six months? Is re-bundling the land permit system a solution?
Minister Park said, "The land permit system is an emergency measure. It is like a medicine to be used in urgent situations. After six months, many political and economic circumstances may change. Economic conditions, monetary supply, and political conditions all fall under this. Therefore, our decisions are based on a comprehensive consideration of all these aspects."
─Please explain the process of expanding the designated regulatory zones after the lifting of the land permit system for the Jam-Sam-Dae-Cheong area.
Mayor Oh remarked, "While the lifting of the land permit system was the direct trigger for the current surge in housing prices, I believe that effective measures must also be implemented to curb rapid volatility, including various loan regulations and financial policies. I've been regularly in contact with the Ministry of Land and Transport and the Financial Services Commission. As a result, I think we were able to make swift decisions. I would like to express my gratitude to the ministries that collaborated for timely actions."
─Was there consensus among the Ministry of Land, Infrastructure and Transport and the Financial Services Commission at the time of the land permit system's lifting in February?
Mayor Oh stated, "Prior to the lifting, discussions were only held with the Ministry of Land, Infrastructure and Transport. There were only discussions of the kind that offered opinions through formal routes."