Allegations are growing that the government intentionally omitted statistics when it announced the Oct. 15 real estate measures that bundled all of Seoul and 12 areas in Gyeonggi as regulated areas (adjustment targets and speculative overheating districts) and land transaction permit zones. To designate regulated areas, the dwelling price increase rate over the past three months must exceed a certain level of the consumer price inflation rate for the city or province, but critics say the government intentionally used the June–August statistics instead of July–September to expand the regulated areas.
If the July–September statistics had been used, eight places including Dobong and Gangbuk in Seoul would have been removed from the regulated areas. The Ministry of Land, Infrastructure and Transport countered that it designated the regulated areas "in accordance with due procedures," but the opposition filed a complaint against Minister Kim Yun-duk and brought an administrative lawsuit to invalidate the designations.
① Eight regions fail to meet regulated-area requirements if September statistics are applied
The opposition argues that if the government had used the September statistics, eight regions currently included in the regulated areas would not meet the inflation-rate standard. In Seoul, Dobong, Gangbuk, Jungnang, and Geumcheon, and in Gyeonggi Province, Uiwang, Jungwon District in Seongnam, and Jangan District and Paldal District in Suwon could not be designated as adjustment targets.
If the June–August statistics used by the Ministry of Land, Infrastructure and Transport (MOLIT) are applied, the consumer price inflation rate in Seoul during this period is about 0.21%. If changed to July–September statistics, the consumer price inflation rate is 0.55%. In Gyeonggi Province, the consumer price inflation rate is 0.25% for June–August but 0.63% for July–September.
If the June–August statistics are applied, to be designated as an adjustment target, the dwelling price increase rate must exceed 0.27% in Seoul and 0.32% in Gyeonggi. If the July–September statistics are used, the standards rise to 0.71% for Seoul and 0.82% for Gyeonggi.
In that case, four places in Seoul included in the regulated areas this time—Jungnang (0.58%), Gangbuk (0.51%), Dobong (0.45%), and Geumcheon (0.56%)—and four places in Gyeonggi—Uiwang (0.54%), Jungwon in Seongnam (0.75%), Jangan in Suwon (0.36%), and Paldal District in Suwon (0.69%)—a total of eight, fall short of the inflation-rate standard.
Eunpyeong District in Seoul (0.78%) and Sujeong District in Seongnam (0.88%) meet the adjustment-target requirements but fall short of the designation requirements for speculative overheating districts, which are 1.5 times the consumer price inflation rate (0.82% for Seoul and 0.94% for Gyeonggi).
Even if the June–August statistics are used as MOLIT claims, there are areas where controversy remains. In Hwaseong and Gwangju in Gyeonggi, the dwelling price increase rates for June–August were 0.44% and 0.4%, respectively, exceeding 1.3 times Gyeonggi's consumer price inflation rate (0.25%), yet they were not designated as adjustment targets.
MOLIT said that although these areas met the quantitative criteria, weekly change rates turned downward in September, showing stabilization in the dwellings market, so they were not designated as regulated areas. While qualitative requirements are also necessary for designation, the market believes controversy over the system's consistency will be unavoidable.
A real estate expert said, "Before the Oct. 15 measures came out, the government likely recognized in early October that September's consumer price inflation had jumped," adding, "If the September statistics were applied, the part where the standards for designating regulated areas become higher could have been a problem." The expert also said, "A regulated area is not something that must be designated just because it can be," and added, "It would be more reasonable to designate when many people can accept the designation of regulated areas."
② Intentional omission of September statistics? Whether statistics can be used before publication is the key
In principle, MOLIT should use the dwelling price increase rate statistics for September, the month immediately preceding October, when the effects of the adjustment targets and speculative overheating districts took effect under the Oct. 15 measures. According to Article 72-3 of the Enforcement Decree of the Housing Act, "An area may be designated as an adjustment target if the dwelling price increase rate of the area for three months retroactive from the month immediately preceding the month in which the date of designation as an adjustment target falls exceeds 1.3 times the consumer price inflation rate of the city or province to which the area belongs." For speculative overheating districts, the designation requirements are met if the dwelling price increase rate over the past three months exceeds 1.5 times the consumer price inflation rate.
The issue here is whether the September dwelling price increase statistics existed. The Enforcement Decree of the Housing Act provides that if there are no statistics for the prescribed period, statistics for the month or year closest to that period may be used.
MOLIT should originally use the September statistics, but if there are no statistics for that period, it may use the August statistics. MOLIT said, "At the time of review and resolution by the Housing Policy Deliberation Committee (Jujeongsim), which was the point at which we determined whether the legal designation criteria for adjustment targets and speculative overheating districts were met, the Korea Real Estate Board's monthly dwelling price trend survey had statistics only up to August."
The opposition, however, believes that MOLIT had already secured the September statistics. It suspects that they were intentionally excluded because many places would fail to meet the requirements for regulated areas if the September statistics were applied. To designate regulated areas, Jujeongsim must be convened, and the opposition claims that the September statistics were delivered to MOLIT before Jujeongsim was held.
According to Representative Cheon Ha-ram's office of the Reform Party, the Korea Real Estate Board (REB) provided the September statistics to MOLIT around 4 p.m. on Oct. 13. MOLIT initiated the Jujeongsim procedure at 4:18 p.m. the same day. The time the official letter requesting Jujeongsim review was sent was 6:01 p.m., 1 hour and 43 minutes later. The opposition's claim that MOLIT secured the September statistics before convening Jujeongsim is effectively true.
The issue, however, is whether the September statistics could have been used when designating regulated areas. MOLIT explained that under the Statistics Act, providing or leaking statistics before publication is prohibited, so they could not be provided to Jujeongsim commissioners. The REB's September dwelling price increase statistics were published at 2 p.m. on Oct. 15.
The opposition argues, however, that even though the September statistics existed as of the date of disposition, they were intentionally excluded, violating the Housing Act. As the legality of the Oct. 15 measures is to be determined through an administrative lawsuit, the court is expected to focus on whether the September statistics could be used.
A real estate expert who requested anonymity said, "With the REB's weekly dwelling price increase statistics coming out, MOLIT likely had an internal view of the monthly index," adding, "It is unlikely that this decision was made because they did not know the monthly statistics."
Another real estate expert said, "Regardless of whether the statistics were published, the government should have reviewed measures to minimize harm and inconvenience to the public," adding, "Even if it is a sweeping regulation to curb rising home prices, there is regret that a decision should have been made that considered the people harmed by this regulation."