[One Month After the Dec. 16 Measures] Three Years of Moon Administration's High-Intensity Policies... Market Response

Need to Shift Policy from Demand Suppression to Supply Expansion

[Asia Economy Reporter Donghyun Choi] Rising, rising, and rising again. Every time the Moon Jae-in administration announced three strong real estate policies on August 2, September 13, and December 16, Seoul apartment prices increased. Although these regulatory measures were introduced by the government to stabilize housing prices, the market responded differently. Experts point out that it is time to consider increasing supply rather than imposing regulations to stabilize the real estate market.

According to Real Estate 114 on the 15th, the Seoul apartment price increase rate was 0.33% during the four weeks (December 20 to January 10) following the December 16 measures last year.

In fact, after the announcement of the December 16 measures, a 164㎡ apartment (exclusive area) in Acro River Park, Banpo-dong, Seocho-gu, Seoul, was sold for 4.38 billion KRW on the 25th of last month. The same property was traded for 4.3 billion KRW a month earlier. Among reconstruction apartments, a 127㎡ unit in Gaepo Woosung 2nd Complex was traded for 3.45 billion KRW on the 21st of last month. This complex was sold for 3.2 billion KRW just a month earlier.

After the August 2, 2017 measures, which focused on expanding restrictions on pre-sale rights transfers, financial regulations, and tax strengthening, Seoul apartment prices rose by 0.44% over four weeks. During the September 13, 2018 measures, which included comprehensive real estate tax and capital gains tax surcharges, prices increased by 1.1%. In particular, reconstruction apartments in the four Gangnam districts (Seocho, Gangnam, Songpa, and Gangdong) rose 0.76% in the four weeks following the announcement. Although the price increase rate narrowed after the three high-intensity measures, prices themselves all rose.

The market also froze due to government regulations. Transaction volumes decreased similarly across all three policies. According to the Ministry of Land, Infrastructure and Transport's actual transaction system, 1,738 Seoul apartment transactions occurred over 29 trading days from the 16th of last month to the 13th of this month. This is a 78.5% decrease compared to 8,082 transactions during the 29 trading days immediately before the December 16 measures. Especially, the proportion of ultra-high-priced apartment transactions over 1.5 billion KRW halved from 8.59% to 4.02%. Considering the 60-day reporting period for housing transactions, the market changes before and after the measures are striking. After the August 2 measures, 4,373 Seoul apartment transactions occurred over 29 trading days, a 69.8% decrease compared to the previous 29 trading days. Using the same criteria, Seoul apartment transactions during the September 13 measures dropped 77.6% to 3,424 transactions.

Three months after the announcement of the government's high-intensity real estate policies, Seoul apartment prices surged further. According to Korea Appraisal Board statistics, Seoul apartment prices rose 0.35% three months after the August 2 measures and increased 3.72% after six months. The September 13 measures saw a 0.34% increase after three months, followed by a 0.9% decline after six months, but prices turned upward again on July 1 of last year, less than a year later, and have continued to rise for 27 consecutive weeks as of the 6th.

Experts agree that the government needs to seek a change in perception regarding the real estate market. They emphasize that the government should implement more proactive supply measures. Even the previous administration, which also focused solely on real estate regulations like the current government, shifted to expanding supply in its later term. The previous administration switched from demand suppression to supply expansion starting in 2006, constructing large-scale second-phase new towns such as Pangyo and Wirye to absorb demand in the Gangnam area.

Yang Ji-young, head of Yang Ji-young R&C Research Institute, said, "The December 16 measures may control housing prices in the short term, but to stabilize prices in the long term, supply measures must come first. The pace of promoting the third-phase new towns should be accelerated, and easing reconstruction regulations and lifting development restrictions on Seoul's greenbelt areas could be considered if resident welfare and rental households are guaranteed."

This content was produced with the assistance of AI translation services.