Less than a month after it released the Oct. 15 real estate measures, the government signaled it would consider expanding regulated areas. With signs of a "balloon effect," in which demand crowds into nonregulated areas and pushes up home prices, it indicated a hard-line stance. Experts say responses such as expanding regulated areas are merely stopgaps. They warn the administration could follow in the footsteps of the Moon Jae-in government, which had as many as 161 regulated areas. There are also concerns that a cliff in dwelling transactions could worsen housing insecurity for ordinary people.
According to weekly apartment price trends for the first week of November (as of the 3rd) released on the 13th by the Korea Real Estate Board (REB), in Guri, Gyeonggi Province, a nonregulated area, the week-over-week apartment sale price growth rate was 0.52%. Compared with the second week of October (0.05%) before the Oct. 15 real estate measures were released, the rate jumped more than tenfold. In Hwaseong, Gyeonggi Province, which includes Dongtan and was removed from regulated areas, the apartment sale price growth rate over the same period rose from -0.03% to 0.26%. It means falling home prices turned upward.
After the government designated all of Seoul and 12 locations in Gyeonggi Province as areas subject to adjustment and speculative overheating districts, it is interpreted that demand avoiding loan regulations and primary-residence requirements flowed into nonregulated areas, causing a balloon effect. In regulated areas, the loan-to-value ratio (LTV, the ratio of loan amount to home price) for mortgage loan is tightened from 70% to 40%, and especially in land transaction permit zones, a two-year primary-residence obligation applies, making gap investing (buying with a jeonse tenant in place) impossible.
On the 11th, Minister Kim Yun-duk of the Ministry of Land, Infrastructure and Transport directly mentioned the two areas, saying, "In the case of Guri or Hwaseong in Gyeonggi Province, there are concerns that real estate prices could rise due to the balloon effect," and added, "There is a need to consider expanding regulations in certain areas." In Hwaseong, the rise in apartment prices near stations in the Dongtan new town is particularly notable. The 84-square-meter unit at "Dongtan Station Lotte Castle" set a new record when it changed hands for 1.69 billion won on the 20th of last month. Also, the 97-square-meter type at "Dongtan Station Siheom The Sharp Central City" set a new record when it changed hands for 1.515 billion won on the 23rd of last month.
However, there is an assessment that simply continuing to expand regulated areas to block the balloon effect will not be effective in reining in home prices. Ko Jun-seok, a professor at the Yonsei University Sangnam Institute of Management, said, "During the Moon Jae-in government, there were as many as 112 areas subject to adjustment. Under the Yoon Suk-yeol administration, everything was removed except the four districts of Gangnam 3 districts and Yongsan in Seoul, but if the current government seeks to control home prices by expanding regulated areas, it would be following the previous government's path."
Some also point out that larger side effects, such as greater housing insecurity for ordinary people, are a concern. Professor Ko said, "Supply does not mean only new dwellings supply. The circulation of existing dwellings through sales is also supply," adding, "Prices can be controlled only when listings continue to come to market without being locked up, but policies that expand regulated areas can only reduce supply. It is also negative for housing stability for ordinary people."
Experts agreed that a "pinpoint adjustment" of regulated areas is needed. Choi Won-cheol, a special-appointment professor at the Hanyang University Graduate School of Real Estate Convergence, said, "In regions such as Nodogang (Nowon, Dobong, Gangbuk), Geumgwangu (Geumcheon, Gwanak, Guro), and parts of Gyeonggi Province, the government needs to listen to residents," adding, "There is a need to reasonably fine-tune regulated areas with pinpoint adjustments."
Park Hap-su, an adjunct professor at the Konkuk University Graduate School of Real Estate, said, "In some areas where end-user transactions primarily occur, there is a heightened risk that the real estate market will become excessively sluggish, so lifting regulated areas is necessary," adding, "At minimum, land transaction permit zones should be lifted. One might think gap investing will flood in, but given loan regulations and the higher acquisition tax in areas subject to adjustment, we judge that speculative forces will not swarm."