As Seoul Apartment Buying Sentiment Recovers... Government and Ruling Party Issue 'Warning' to Market

Gangnam Purchase Inquiries Return to Pre-COVID-19 Levels
Trading Supply-Demand Index Rises Above 100 After 10 Weeks
Kim Tae-nyeon Floor Leader "Strong and Firm Response"

(Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] Demand for apartments in the Gangnam area of Seoul has recovered to pre-COVID-19 levels. Accordingly, apartment sale prices, which had stalled for a while, are showing signs of rising again.

The government and the Democratic Party of Korea immediately stated that they would "take necessary measures without hesitation" as house prices began to rise. Industry experts predict that this year will be the de facto last year to strongly push real estate stabilization legislation, so the speed of policy preparation by the government and ruling party is expected to accelerate.

According to the Korea Real Estate Board on the 13th, as of the 8th, the Seoul apartment sales supply-demand index recorded 100.8, up 3.8 points from the previous week (97.0). The sales supply-demand index ranges from 0 to 200, where values closer to 0 indicate supply dominance, and values closer to 200 indicate demand dominance.

A value above 100 means that demand for apartments has exceeded supply.

It has been 10 weeks since the Seoul apartment sales supply-demand index exceeded 100, last doing so in the last week of March (100.0). With the rapid sales of apartments in Gangnam for holding tax and capital gains tax savings exhausted, and development prospects emerging one after another in Yongsan, Jamsil, and Mokdong, buyer sentiment for housing is interpreted to be reviving.

Private research firm KB Real Estate LiveOn also explained, "Buyer inquiries in Seoul's Gangnam area have recovered to levels just before the COVID-19 outbreak," adding, "Non-Gangnam areas such as Geumcheon-gu, Nowon-gu, and Mapo-gu have reversed to an upward trend, and buyer inquiries in Gangnam have increased." According to KB Real Estate, Songpa (0.12%), Gangnam (0.06%), and Seocho-gu (0.03%), which had been in a downward trend, have all shifted to an upward trend.

The ruling Democratic Party issued a warning message to the real estate market as the rise in house prices became serious. Kim Tae-nyeon, the floor leader of the Democratic Party, emphasized the swift promotion of the 'five major bills' including the Comprehensive Real Estate Tax Act, Income Tax Act, Housing Act, Local Tax Special Cases Act, and Private Rental Housing Special Act, stating, "We will respond strongly and decisively to stabilize house prices."

The ruling party's swift action is analyzed to reflect the Blue House's determination to curb the sharply rising real estate prices within its term. President Moon Jae-in said at the New Year's press conference on January 14, "In some areas, prices have risen so sharply that it is difficult for ordinary citizens to accept, and they must be restored to their original state," adding, "If the current measures are judged to have expired, we will continuously introduce stronger measures."

Regarding the five major bills, Floor Leader Kim explained, "We will correct tax fairness on housing ownership through amendments to the Comprehensive Real Estate Tax Act, limit capital gains tax benefits to actual residence through amendments to the Income Tax Act, and establish fair subscription order through amendments to the Housing Act." On amendments to the Local Tax Special Cases Act and the Private Rental Housing Special Act, he said, "We will reduce excessive benefits for rental business operators and increase their responsibility."

Since the next presidential election is only one year away in March next year, there is also an analysis that this year is effectively the last year for the ruling party to strongly push real estate-related legislation.

The government is also reportedly considering additional measures to stabilize house prices. Measures such as designating the Jamsil area as a land transaction permission zone and lowering the loan restriction threshold are being discussed. A Ministry of Land, Infrastructure and Transport official said, "We are reviewing this with vigilance."

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