With the government adding Dongtan-gu in Hwaseong, Giheung-gu in Yongin, and Guri to the land transaction permit zones following their designation as adjusted areas and overheated speculation districts, the dwellings sales market in these areas is expected to pause for the time being. That is because thresholds for loans, taxes, and subscriptions are rising, and in principle, purchases of apartments require end-user occupancy. However, the market is also warning that this is a "belated regulation" introduced after prices had already surged, raising concerns about a balloon effect of buyers shifting to nearby areas and instability in the jeonsei and monthly rent markets due to fewer rental listings.
The Ministry of Land, Infrastructure and Transport said on the 30th that, following review and resolution by the Housing Policy Deliberation Committee, three locations—Dongtan-gu in Hwaseong, Giheung-gu in Yongin, and Guri—will be newly designated as adjusted areas and overheated speculation districts. The regulatory designations take effect on Jul. 1. Gyeonggi Province also designated these areas as land transaction permit zones. The designation period runs from Jul. 5 to Dec. 31, 2027. The permit requirement is limited to apartment transaction.
With this designation, the three areas will be subject to the so-called "triple regulation" of adjusted areas, overheated speculation districts, and land transaction permit zones. In regulated areas, the loan-to-value (LTV) ratio for mortgage loan is tightened, and loans for the purpose of purchasing dwellings by existing homeowners are restricted. First-priority subscription eligibility, resale restrictions, and re-winning limitations also become stricter. For multi-homeowners within adjusted areas, the burden of heavy acquisition tax and capital gains tax increases.
◇ Buyer sentiment sure to weaken… Criticism that the move "came after prices already rose"
The market expects buyer sentiment to cool quickly in the short term. Yang Ji-young, a senior advisor at Shinhan Premier Pathfinder, said, "When an area is designated as regulated, loan, tax, and subscription rules are simultaneously tightened, which inevitably weakens buyer sentiment and reduces transaction volume," adding, "Right after the regulation, both buyers and sellers tend to wait and see, making it highly likely that the pace of price gains will slow."
Some complexes are also mentioned as possibly seeing a temporary price adjustment. Nam Hyeok-woo, a real estate researcher at Woori Bank, said, "In Dongtan, there was pressure from rapid price increases in a short period, centered on popular complexes near stations, and with the regulatory effect overlapping, buyers are likely to remain on the sidelines," adding, "Around the time the rules take effect, some multi-homeowners may put urgent listings on the market."
However, some say it is uncertain whether this step will actually lead to stabilizing home prices. In Dongtan, Guri, and Giheung, home prices have already risen sharply over the past few months, and signs of buyer pullback have appeared in some on-the-ground markets. A real estate expert who requested anonymity said, "In Dongtan, prices jumped a lot in a short time, and recently buyers have become more watchful," adding, "The market started to pause before the regulation came out."
Experts note that supply measures must accompany policy for medium- to long-term price stability. Yang said, "It is difficult to keep home prices stable for a long time with regulations alone," adding, "A supply roadmap the market can trust and consistent policy signals need to come together."
◇ Balloon effect likely to vary by area… Jeonsei and monthly rent instability also a factor
Concerns about a balloon effect remain. Buyer demand from regulated areas could shift to nearby unregulated areas. Go Jun-seok, a professor at Yonsei University Sangnam Institute of Management, said, "In Guri, demand may move to nearby areas such as Dasan and Wangsuk in Namyangju," adding, "In Dongtan, while prices for 84-square-meter units near Dongtan Station exceed 2 billion won, surrounding areas are relatively cheaper, so a balloon effect could appear even within Dongtan."
Some analysis suggests, however, that the balloon effect is unlikely to spread across the entire Seoul metropolitan area. Lee Eun-hyung, a research fellow at the Korea Research Institute for Construction Policy, said, "Some demand may shift to areas adjacent to the regulated zones, but it is hard to see a blanket balloon effect across the metropolitan area."
Instability in the jeonsei and monthly rent markets is another variable. In land transaction permit zones, purchasing an apartment in principle requires an end-user occupancy purpose, restricting gap purchases that involve jeonsei tenants. As a result, rental supply that would have come onto the sales market could shrink, potentially pushing up jeonsei and monthly rents.
Nam said, "The newly designated regulated areas already lack jeonsei and monthly rent listings," adding, "If transactions center on listings available for actual occupancy, rental supply will fall and volatility in jeonsei and monthly rents could increase." Go also said, "If purchases with jeonsei tenants are restricted in principle, rental supply will decline, making jeonsei and monthly rents likely to trend upward."