In the real estate market, the possibility of lifting designations of land transaction permit zones (the land transaction permit system) is being discussed. Since the government's view that the land transaction permit system is a "temporary measure" that cannot be maintained for a long time has been shared recently, expectations are rising that the system could be lifted in areas where property prices have not risen much. However, experts said that if the land transaction permit system is lifted while concerns about market speculation have not completely disappeared, side effects could be significant, and they expected the government would find it difficult to decide to lift the system.
According to the real estate industry on the 7th, the market has recently been discussing the possibility of lifting the land transaction permit system in districts where home prices have not risen sharply, such as Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, and Guro in Seoul. There is growing expectation that, excluding the three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan, which had been bundled as existing permit zones, and the "Han River belt" such as Mapo and Seongdong, where prices rose significantly, the land transaction permit system could be lifted.
This market expectation stems from recent remarks by the government and political circles about lifting the land transaction permit system. The market expects that discussions on lifting the system will gather pace after the government releases additional supply measures in December.
Recently, Presidential Chief of Staff for Policy Kim Yong-beom also said in a media interview, "The land transaction permit system cannot be drawn out for long; it is a temporary measure," adding, "Once we prepare supply measures and the market calms down, we will comprehensively consider lifting it." Oh Se-hoon, the Seoul mayor, likewise said during a Seoul Metropolitan Council inquiry last month, "Isn't it the case that, at least in the short term, home prices appear to be under control?" and added, "It has become a time worth considering lifting permit zones."
Another reason the market is betting on the possibility of lifting the land transaction permit system is that the rise in Seoul home prices has slowed in areas designated as permit zones recently, and that tying up real estate market transactions for a long period ahead of the June 3 local elections next year would burden the ruling party. According to the Korea Real Estate Board (REB), which released nationwide weekly apartment price trends for the first week of December (as of on the 1st), Seoul apartment sale prices rose 0.17%, with the rate of increase narrowing slightly from the previous week (0.18%). After the Oct. 15 measures were released, Seoul apartment prices saw their rate of increase decline for a month, briefly rebounded on Nov. 17, and then turned to a slowdown from the previous week.
Experts said the government should carefully decide whether to lift the land transaction permit system after determining whether the overheating in the dwellings market that it worried about when designating permit zones has eased. They noted that if the system is lifted based only on political judgment, there is a possibility that the upward trend in home prices will expand again.
Seo Jin-hyung, a professor in the Department of Real Estate Law and Administration at Kwangwoon University, said, "If the conditions for designating the land transaction permit system are not met, it should be lifted, but there is also an aspect of deciding based on political judgment, so whether it is lifted will depend on what intention the government has."
Yoo Seon-jong, a professor in the Department of Real Estate at Konkuk University, said, "There have been cases where the land transaction permit system was lifted in the past. It is not that it cannot be done," adding, "It is possible to lift it if the cause has disappeared after it was designated due to the possibility of speculative overheating."
Yoo said, "However, when lifting a permit zone, whether the timing is right or whether lifting is appropriate should be decided based on market conditions, yet there are cases where political judgment is made," adding, "It is fine to lift the land transaction permit system once it is confirmed that concerns over a sharp rise in home prices have disappeared, but if a political or electoral judgment is made ahead of next year's local elections and a decision is made (to lift the system), the market will move in the opposite direction of the government's intention."
There is also an outlook that, if the land transaction permit system is lifted, investment demand could concentrate on urban renewal sites. Nam Hyeok-woo, a real estate research fellow at Woori Bank, said, "If land transaction permit zones are lifted, inflows of investment demand would be possible with relatively small amounts of investment, and, in line with the Seoul city government and the Ministry of Land, Infrastructure and Transport (MOLIT) supporting urban renewal policies, investment demand is expected to increase to some extent in areas with renewal issues," adding, "Through this, in the case of outer Seoul areas, there is a possibility that a certain degree of 'gap closing' with median Seoul prices will occur."