Limited Effect of 'Pinset Regulation'... Where Does the 'Balloon Effect' Move?

Announcement of 2·20 Real Estate Measures Amid 'Balloon Effect' Spread
Seeming to Adjust Intensity Ahead of General Election... Merely 'Supplementary'
Busy Movements Already Underway to Find 'Next Acceptability'

[Asia Economy Reporter Moon Jiwon] The government has newly designated five southern Gyeonggi areas as regulated zones and strengthened loan regulations in these areas as part of real estate measures. However, analysts suggest that the effects are unlikely to last long-term. Since the measures only regulate the 'balloon effect' in specific regions, there is a high possibility that supplementary measures will be introduced after the general election.

According to the Ministry of Land, Infrastructure and Transport on the 23rd, through the 'February 20 Real Estate Measures,' Suwon's Yeongtong, Gwonseon, and Jangan districts, Anyang's Manan district, and Uiwang city were newly included as regulated zones. Additionally, in these regulated zones, the loan-to-value ratio (LTV) for mortgage loans was tightened from the previous 60% to 50% for houses priced under 900 million KRW and 30% for houses priced over 900 million KRW.

However, the industry's response has been lukewarm. While the regulation is expected to curb some short-term investment demand, there is a high likelihood that the balloon effect will shift to other non-regulated areas. Yang Ji-young, head of R&C Research Institute, explained, "Policies that respond immediately to market reactions and mole-hunting style regulations targeting areas with rising house prices may help stabilize prices in the short term, but it is difficult to stabilize prices in the long term."

There is also an opinion that the government adjusted the level of regulation in consideration of the upcoming general election. Previously, some analyses suggested that areas like Suwon's Paldal district and Yongin's Suji district, which saw significant price increases even after being designated as regulated zones, could be upgraded to speculative overheating zones. However, this policy did not include additional designation of speculative overheating zones for Suwon's Paldal district, Gwanggyo district, or Yongin's Suji and Giheung districts. Therefore, many in the market evaluated that the strength of the regulations was not very high.

The Ministry of Land, Infrastructure and Transport stated that the general election was not considered at all while preparing these measures. Kim Heung-jin, Director of Housing Policy at the Ministry, said, "We considered upgrading existing regulated zones to speculative overheating zones, but since there are not many houses priced over 900 million KRW in southern Gyeonggi, we decided to expand the regulated zones instead."

In other words, because there are not many houses priced over 900 million KRW in these areas, there was no perceived need to upgrade to speculative overheating zones where the LTV for houses over 900 million KRW would be significantly tightened to 20%. The Ministry interpreted this as maintaining the regulated zones while applying a 10% stricter LTV standard to focus regulation on mid- to low-priced houses under 900 million KRW.

The market is already busy looking for areas to follow Suwon, Yongin, and Seongnam. This is why new terms like 'Kim-Bu-Geom (Gimpo, Bucheon, Geomdan),' 'An-Si-Seong (Anyang, Siheung, Hwaseong),' and 'O-Dong-Pyeong (Osan, Dongtan, Pyeongtaek)' have emerged. These areas have relatively weaker regulations and favorable factors such as transportation and development, making them likely targets for the balloon effect to shift.

The government's indication through this measure that there are no suitable additional supply measures is also expected to negatively impact market stability. When asked about additional supply measures during a briefing, a Ministry official replied, "We have previously announced urban supply plans including narrow street housing redevelopment projects," and added, "We are currently preparing how these announced plans can be supplied."

After the general election, the dominant analysis is that the government will introduce targeted regulations on areas where prices surge again. The Ministry also reiterated its intention to focus on targeted regulations, stating, "The government's basic policy direction is to implement customized responses centered on areas where housing prices are rapidly rising."

An industry insider said, "If the government neglects market liquidity and supply shortage issues and only introduces targeted regulations for specific areas, another balloon effect will inevitably continue," adding, "It is time to consider mid- to long-term housing policies."

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