As Dongtan, Giheung and Guri were designated as regulated areas and land transaction permit zones, concerns are growing that buyers could shift to nearby unregulated areas. Observers say the "balloon effect," in which repeated designations of regulated areas under the Moon Jae-in administration spread home price gains to other regions, could reappear. Some in the market are also detecting a mood of heightened expectations as certain unregulated areas are mentioned.
According to the real estate industry on the 2nd, after the government designated Dongtan District in Hwaseong, Giheung District in Yongin and Guri as regulated areas, speculative overheating districts and land transaction permit zones, interest is growing in nearby unregulated areas. On some online real estate communities, place names seen as likely to be affected by the latest curbs—such as Byeollae and Dasan New Town in Namyangju, Manan District in Anyang, and Godeok in Pyeongtaek—are being discussed.
In fact, some nearby areas reportedly saw an increase in apartment purchase inquiries. A licensed real estate agent in Dasan New Town, Namyangju, said, "After Guri was designated as a regulated area and a land transaction permit zone, inquiries increased within a day," adding, "Dasan has always been influenced by the Guri real estate market, so it appears the latest curbs have sparked interest."
The market's concern about a balloon effect stems from lessons learned during past expansions of curbs. The Moon Jae-in administration repeatedly expanded designations of regulated areas, speculative overheating districts and speculative districts to rein in surging home prices. But many assess that as buying demand in tightly regulated areas shifted to nearby unregulated areas, the upward trend in home prices spread in sequence.
Through the Aug. 2, 2017, measures, the Moon Jae-in administration designated all 25 districts of Seoul, Gwacheon in Gyeonggi Province and Sejong as speculative overheating districts. A month later, through the Sept. 5 measures, Bundang District in Seongnam, Gyeonggi Province, and Suseong District in Daegu were added as speculative overheating districts. In 2018, Gwangmyeong and Hanam were designated as speculative overheating districts, and by the end of the same year, Paldal District in Suwon and Suji and Giheung districts in Yongin were designated as regulated areas.
The expansion of regulated areas continued in 2020. In February of that year, Yeongtong, Gwonseon and Jangan districts in Suwon, Manan District in Anyang, and Uiwang were designated as regulated areas, and in June, parts of Gyeonggi, Incheon, Daejeon and Cheongju were also included. Some core areas were raised to speculative overheating districts. While the curbs at the time aimed to curb soaring home prices, assessments later said they had limits in actually breaking the upward trend.
There are concerns that a similar pattern could repeat this time. During the Oct. 15 measures last year, the government designated all of Seoul and parts of Gyeonggi Province as regulated areas and land transaction permit zones at once to block the balloon effect. But as the uptrend in home prices later spread to Dongtan, Giheung and Guri, analysts say additional curbs became unavoidable.
Experts say it is difficult to stabilize the market through curbs alone. Because loans, taxes, subscriptions and owner-occupancy requirements are tightened in regulated areas, buying demand is likely to move to nearby areas with relatively lower entry barriers.
Kim In-man, head of the Kim In-man Real Estate Economy Research Institute, said, "It is natural for people to look to nearby areas instead of places where it has become harder to buy a home," adding, "There are limits to repeating curbs as a method."
Seo Jin-hyung, a professor in the real estate law and administration department at Kwangwoon University, said, "It is hard to expect market stability from curbs alone," adding, "Only when sufficient supply follows in areas with demand can expectations for home price increases ease."