[Q&A] Vice Minister of Economy and Finance: "Limited Balloon Effect of Real Estate Regulations... Considering Additional Regulations"

Identifying Potential Investment Demand for 5.8 Trillion Won Private Sector Projects

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] Kim Yongbeom, First Vice Minister of the Ministry of Economy and Finance, said regarding additional real estate regulatory measures, "The fact that there are no regulations does not cause nationwide fluctuations in real estate prices."

On the same day at the Government Seoul Office, Vice Minister Kim stated, "Characteristics of each region and development demand can be factors causing rapid price increases." He added, "If we determine that regulatory arbitrage causes price increases in the real estate market or spreads price instability throughout the market, we will comprehensively consider additional regulatory measures."

He indicated that even if the government introduces additional regulations for non-capital areas, the balloon effect would be limited.

Below is a Q&A with Vice Minister Kim

▲ As the government continues to announce real estate measures, there are even claims that the entire country is subject to the balloon effect. Is there any concern that additional regulatory measures might cause real estate prices to rise?

= Theoretically, demand can shift from regulated areas to non-regulated areas, but that is not always the case. There must be factors in supply and demand conditions that can move prices. Price fluctuations do not occur nationwide simply due to regulatory differences. Regional characteristics and development demand that could cause rapid price increases may exist, and such factors will be comprehensively considered. If it is judged that regulatory arbitrage causes price increases in specific areas and spreads price instability throughout the real estate market, additional regulations for those areas will also be considered.

▲ You mentioned plans to announce measures to minimize side effects of corporate venture capital (CVC) led by large corporations. What are the details?

= Recently, amendments to the Fair Trade Act have been proposed in the National Assembly by lawmakers such as Kim Byungwoon and Lee Wonwook. Various other proposals may also emerge. Since diverse legislation will be raised in the National Assembly, there is no need for the government to create its own proposal. When various legislative proposals are presented, the government will participate in the National Assembly's discussion process. There may also be legislative proposals to amend the Venture Investment Act. The economic policy direction for the second half of the year stated that limited measures will be allowed to achieve effectiveness without undermining the principle of separation between banking and commerce. If CVCs are allowed, subsidiaries will likely be held by general holding companies, so there are various options such as how to manage their ratios, the extent of CVC operations, and whether to raise private capital when forming funds. We will seek ways to maximize effectiveness while minimizing side effects.

▲ What is the plan for the 5.8 trillion won private sector project investment demand?

= Revealing it in advance could affect the real estate market. The projects have already been identified, and we need to observe their progress. However, since nothing has been finalized yet, we could not specify details.

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