In the real estate market, the possibility of lifting the land transaction permit zone (the land transaction permit system) is being discussed. After the government's view that the land transaction permit system is a "temporary measure" that cannot be maintained for a long time was shared recently, the market is betting on lifting the system in areas where real estate price increases have not been large. However, experts said side effects could be significant if the system is lifted while concerns about speculation in the market have not completely disappeared, and they noted that the government's decision to lift the system would not be easy.
According to the real estate industry on the 7th, the market has recently been talking about the possibility of lifting the land transaction permit system in districts where home prices have not risen much, such as Nowon, Dobong, Gangbuk, Geumcheon, Gwanak, and Guro in Seoul. There are rising expectations that the system could be lifted except for the three Gangnam districts (Gangnam, Seocho, Songpa) and Yongsan, which were already designated as permit zones, and the "Han River belt," such as Mapo and Seongdong, where home prices increased sharply.
This market optimism 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 gain momentum 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 prolonged and is a temporary measure," adding, "Once supply measures are prepared and the market calms, we will comprehensively consider lifting it." Oh Se-hoon, the Seoul mayor, likewise said during a Seoul Metropolitan Council questioning session on city administration in November, "Isn't it the case that home prices, at least in the short term, appear to have been contained?" and added, "It is time to consider lifting the permit zones."
Another reason the market is predicting a possible lifting is that the upward trend in Seoul home prices within the recent permit zones has slowed, and with the June 3 local elections next year, keeping transactions in the real estate market tied up for a long time could be a burden for the ruling party. According to the Korea Real Estate Board (REB)'s nationwide weekly apartment price trends for the first week of December (as of on the 1st), apartment sale prices in Seoul rose 0.17%, a slight decrease in the pace of increase from the previous week (0.18%). After the Oct. 15 measures were released, the pace of increases in Seoul apartment prices slowed for a month, briefly rebounded on Nov. 17, and then began to ease again from the previous week.
Experts said the government should carefully decide on lifting the land transaction permit system after determining whether the overheating in the dwellings market—an initial concern when the zones were designated—has subsided. They noted that if the system is lifted based only on political judgment, there is a possibility that the upward trend in home prices could widen again.
Seo Jin-hyung, a professor in the real estate law and administration department at Kwangwoon University, said, "If the designation no longer meets the requirements for the land transaction permit system, it should be lifted, but there are aspects that are decided by political judgment, so whether it is lifted will depend on what the government intends to do."
Yoo Sun-jong, a professor in the real estate department at Konkuk University, said, "There have been cases where the land transaction permit system was lifted. It is not impossible," adding, "It is possible to lift it if the cause that led to designation due to the possibility of speculative overheating disappears."
Yoo said, "However, whether it is the right time to lift the permit zones, or whether lifting is appropriate at all, should be judged by looking at market conditions, but there are cases where political judgment is made," adding, "It is fine to lift the land transaction permit system once it is confirmed that the risk of a sharp rise in home prices has disappeared, but if the decision is made based on political calculations ahead of next year's local elections, the market will move in the opposite direction of the government's intent."
There are also projections that investment demand could concentrate on redevelopment and reconstruction zones if the land transaction permit system is lifted. Nam Hyuk-woo, a real estate research fellow at Woori Bank, said, "If the land transaction permit zone is lifted, it will be possible for investment demand to flow in with relatively small amounts of capital, and, in tandem with policy support for redevelopment and reconstruction by the Seoul city government and the Ministry of Land, Infrastructure and Transport (MOLIT), investment demand is expected to increase to some extent in areas with redevelopment and reconstruction issues," adding, "Through this, in the case of the outskirts of Seoul, there is also a possibility of some 'gap filling' with median-price areas in Seoul."