Seoul Gangnam Housing Prices Rising Again... What Regulations Will the Government Introduce?

Seoul Sale and Jeonse Prices Rise Together... Effect of 12·16 Measures Wears Off
Possibility of Lowering Loan Restriction Thresholds at 900 Million and 1.5 Billion Won

[Asia Economy Reporter Moon Jiwon] As apartment sale and jeonse prices in Seoul's Gangnam area, the epicenter of rising housing prices, rise simultaneously, the government appears ready to introduce additional regulatory measures. Since all of Seoul is already designated as a regulated area and there are no suitable plans to expand supply, it is analyzed that the government is likely to lower the current loan restriction thresholds of 900 million KRW and 1.5 billion KRW and to more strongly enforce actual transaction investigations based on funding source plans.

According to the government on the 12th, the Ministry of Land, Infrastructure and Transport (MOLIT) is considering additional regulations as Seoul apartment prices, which had stalled due to COVID-19 and government regulations, have begun to rebound. A MOLIT official said, "We are reviewing (additional measures) with serious vigilance" and "We will take necessary actions according to market trends."

Although specific regulated areas or measures have not been disclosed, since Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki emphasized taking "immediate stabilization measures" the day before, it is expected that measures could be announced as early as next week. This is because it is difficult to ignore the rise in housing prices in the Gangnam area, which is effectively a barometer of nationwide housing prices.

According to a survey by the Korea Real Estate Board, apartment prices in Gangnam (0.02%) and Songpa-gu (0.05%) have shifted to an upward trend this week for the first time in five months, while Seocho and Gangdong-gu have stabilized. In particular, with the full implementation of the private land price ceiling system starting from the 29th of next month, the real estate market is likely to become more volatile. If the sentiment spreads that supply in Seoul will decrease due to the price ceiling system, the scarcity of newly built apartments could soar.

The first measure being discussed is designating areas around Jamsil Sports Complex in Songpa-gu and the Samsung-dong area in Gangnam-gu as land transaction permission zones. This aims to curb speculative demand arising from the groundbreaking of Hyundai Motor's Global Business Center (GBC) and the private investment development project for Jamsil sports and MICE (Meetings, Incentives, Conferences, and Exhibitions). MOLIT previously designated this area as a land transaction permission zone after demand concentrated here following the announcement of the Yongsan maintenance depot development plan last month.

Measures to tighten loan restrictions are also being considered. Since Seoul is already designated as a speculative overheating district, comprehensive regulations applicable beyond loan restrictions are limited. Under the December 16, 2020 measures, mortgage loans are prohibited for houses priced over 1.5 billion KRW, and for houses exceeding 900 million KRW, only 20% of the loan-to-value ratio (LTV) applies to the amount exceeding 900 million KRW.

Given the recent sharp price increases in mid- to low-priced complexes in areas such as Guro-gu and Geumcheon-gu, the LTV ratio for houses exceeding 900 million KRW could be further lowered or the threshold amount adjusted downward. To prevent the influx of abundant liquidity into the Gangnam area, lowering the loan prohibition threshold from 1.5 billion KRW is also being discussed.

However, there are many criticisms that additional regulations will also have limited effectiveness since the government has failed to properly control housing prices despite introducing 21 rounds of regulations. The December 16, 2020 measures, considered the strongest real estate policy in history, lost their effect within half a year, and subsequent supplementary measures caused a "balloon effect," pushing up housing prices in the metropolitan area instead.

Ham Young-jin, head of the Big Data Lab at Zigbang, said, "Since Seoul is already a regulated area and increasing supply is not easy, it seems difficult to come up with sharp measures other than designating land transaction permission zones, investigating funding sources, and strengthening loan regulations."

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