Did Private Rental Housing Increase Cause House Prices to Rise?… Seoul City vs Ministry of Land, Infrastructure and Transport 'Out of Sync'

Korea Appraisal Board under Ministry of Land, Infrastructure and Transport: "Little Correlation Between Rental Housing and House Price Increase"
Most Rental Houses Are Below 300 Million KRW, While House Prices Rise Mainly Above 900 Million KRW
Meanwhile, Seoul City and Civic Groups Are Negative About 'Rental Housing Activation' Measures

[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] The government and Seoul Metropolitan Government are engaged in an unexpected debate over whether the policy to revitalize private rental housing has influenced the rapid rise in housing prices. The Seoul Metropolitan Government and some civic groups claim that the mandatory rental regulations in the private rental business caused a 'withdrawal of listings' effect, driving up housing prices, while the Korea Real Estate Board under the Ministry of Land, Infrastructure and Transport has rebutted, stating there is 'no correlation.'

According to industry sources on the 4th, the Korea Real Estate Board held a seminar yesterday at the Construction Hall in Nonhyeon-dong, Seoul, to refute criticisms that housing prices rose as a side effect of the government's private rental business revitalization policy. The Korea Real Estate Board held a public seminar to address this issue due to the recent emergence of government accountability debates related to it.

Private rental housing refers to houses registered by individuals or corporations for rental business purposes. Rental business operators contribute to housing stability by supplying housing to tenants for 4 to 8 years without excessive rent increases, in exchange for various tax benefits such as capital gains tax reductions.

The Seoul Metropolitan Government and civic groups argue that registered rental housing is practically difficult to sell during the mandatory rental period, reducing the number of houses available for transaction. They claim that the withdrawal of listings phenomenon, which appeared after the government introduced the 'Rental Housing Registration Revitalization Plan' in 2017, has driven up surrounding housing prices. There are also criticisms that multi-homeowners use the rental business system as a tax avoidance method, expanding speculation, since the tax benefits outweigh the obligations borne by rental business operators.

In response, Park Jin-baek, a senior researcher at the Korea Real Estate Board's Real Estate Research Institute, analyzed that it is difficult to simply view the increase in private rental housing as causing the withdrawal of listings effect. The reason is that 83.7% of newly registered rental houses last year were priced below 600 million KRW, while the price surge mainly occurred in high-priced houses exceeding 900 million KRW in the same year. The Real Estate Board added that the ratio of registered rental housing to the total number of houses in Seoul's Gangnam, Seocho, Songpa, and Yangcheon districts?where price increases were significant?was only 0.8 to 2.8%, indicating minimal market impact.

However, the Ministry of Land, Infrastructure and Transport is in a difficult position. Although it has set a goal to reach 2 million private rental houses by 2022, it cannot fully open the private rental market that provides excessive tax benefits to multi-homeowners while simultaneously pressuring them to sell their houses, with even the minister urging, "Multi-homeowners should sell their houses."

A Ministry of Land, Infrastructure and Transport official said, "It seems that the Seoul Metropolitan Government linked rental housing and the withdrawal of listings effect in agreement with some media and civic groups' opinions," but added, "Going forward, rather than increasing rental housing, we will focus on managing the system to help ensure tenants' housing stability."

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