Seo Jin-hyung, President of the Korean Real Estate Society, "Reconstruction Tied Up by Triple Regulations... Inevitable Full-Scale Decline in the Second Half"

Seojin Hyung, President of the Korean Real Estate Society (Professor at Gyeongin Women's University)

[Asia Economy Reporter Choi Dong-hyun] "Signals of a full-scale decline are expected to appear, centered on reconstruction apartments."

On the 21st, Seo Jin-hyung, President of the Korea Real Estate Society (Professor at Gyeongin Women's University), said in an interview with Asia Economy, "With the Reconstruction Excess Profit Recovery System, the private land price ceiling system, and now the expansion of rental housing ratios, regulations on maintenance projects are becoming increasingly stringent." He added, "Although some ruling party candidates in certain regions announced pledges to ease real estate regulations in the recent general election, it is unlikely to translate into government policy," explaining, "Considering the current administration's identity and policy trends, the possibility of changing the real estate policy stance is low."

President Seo diagnosed that there are many factors that could increase volatility in the real estate market, making it difficult for the government to hastily change its policy stance. "Despite COVID-19, there are many factors causing housing price instability, such as abundant liquidity in the market, low base interest rates, and land compensation payments for the 3rd New Town development," he said.

However, Seo pointed out that government real estate demand and supply policies that do not align with market logic are rather fueling market confusion. He emphasized, "Demand suppression measures through loan regulations or increased taxes cannot solve real estate problems," adding, "Regulating prices and suppressing demand distort the real estate market." He further stated, "Supply should be provided where there is demand, but strong regulations on redevelopment and reconstruction in the Seoul area are hindering smooth supply," and argued, "For Seoul, it is necessary to shift the supply paradigm in the long term through high-density development or the creation of compact cities."

Regarding the private land price ceiling system, whose grace period ends at the end of July, Seo also stressed the urgency of improvement. In particular, he considered the introduction of a bond bidding system as an alternative to the price ceiling system. He said, "The main issue in the debate over the implementation of the price ceiling system is who takes the development profits?the construction companies or the buyers," adding, "If the bond bidding system is introduced, the government can recover development profits and invest them in public housing policies, making it a reasonable alternative."

Meanwhile, Seo predicted that commercial real estate would suffer the greatest impact due to the COVID-19 aftermath. He explained that self-employed individuals are facing increased burdens due to minimum wage hikes, and their sales and income are declining due to worsening business conditions. Investors' sentiment has also been dampened by the strengthening of the Commercial Lease Protection Act, significantly reducing the attractiveness of investing in commercial real estate. Seo said, "Under current conditions, it is impossible to achieve investment returns or operating profits in commercial real estate," forecasting, "Vacancies in commercial properties will increase for the time being, and rents and key money will continue to decline."

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