"Anti-Market" "Inequality"... 3 Controversial Regulations That Keep Stirring Debate

[Asia Economy Reporter Yuri Kim] "Does it make sense that the collateral value of a 2 billion won asset is worth less than that of a 100 million won asset?" This was a flood of criticism posted on various online communities immediately after the government announced the December 16th measures last year.

As the government’s measures to impose 'pinpoint' regulations on the real estate market continue, concerns are being raised that anti-market complaints and regulations are emerging everywhere. Experts warn that while such regulations may have a 'short-term pause' effect on the market, they could cause market distortions in the long run, leading to bigger problems.

A representative example is the 'complete ban on loans for apartments exceeding 1.5 billion won,' which was the core of the December 16th measures announced by the government last year. It prohibits housing mortgage loans for purchasing 'ultra-high-end homes' priced over 1.5 billion won in speculative areas and speculative overheating districts. After the policy was implemented, criticism arose in the market that it was an excessive restriction on private property rights. Constitutional controversies raised by the legal community are still ongoing. Hee-chan Jeong, a lawyer at Anguk Law Office, filed a constitutional complaint with the Constitutional Court the day after the announcement, arguing that the government's real estate regulations infringe on constitutional rights such as the pursuit of happiness, equality, and property rights. Article 23 of the Constitution guarantees the property of all citizens and states that restrictions and compensation on property rights for public necessity must be based on law.

This regulation froze the market, which had been on an upward trend at the time, halting transactions and lowering the prices of apartments around the 1.5 billion won mark to below 1.5 billion won. However, regardless of this, concerns remain about the fact that the asset collateral value of expensive homes has completely disappeared. Recently, as Seoul housing prices, including these ultra-high-end homes, have started to rise again, the market is discussing the government's next move to strengthen loan restriction criteria. This is causing side effects by triggering anxiety among prospective buyers and accelerating market movements. An industry insider said, "The reason market participants react quickly is because of the uncertainty about when real estate policies might change again," adding, "These hit-and-miss measures are undermining policy credibility."

The Housing and Urban Guarantee Corporation (HUG), which monopolizes the pre-sale guarantee market, is also under fire for its 'opaque high pre-sale price review standards.' This not only infringes on private property rights but also distorts market prices and encourages 'lottery-like subscription' phenomena. Currently, HUG’s pre-sale guarantee method sets prices based on apartments sold within one year in the surrounding area of Seoul, and if more than a year has passed, the price is set within 105% of that level. HUG faced backlash for defining 'surrounding' not by the same living area but by physical autonomous districts, which became a major cause of pre-sale delays. Last year, HUG demanded that the pre-sale price of Raemian La Classe (Sang-A 2nd complex) in Samseong-dong be set at the level of The H Forecent (Daewoo Apartment) in Ilwon-dong (45.69 million won per 3.3㎡), which led to the post-sale issue and eventually triggered the introduction of the private land pre-sale price ceiling system. Although there are complaints about HUG’s standards not only in Gangnam but also in various places, without HUG’s pre-sale guarantee, general sales are virtually impossible, so developers reluctantly accept it to proceed with their projects. Recently, the Dunchon Jugong in Gangdong-gu, known as the largest pre-sale project in Seoul this year, has become uncertain whether it can proceed with pre-sale before the price ceiling system due to disagreements with HUG over the pre-sale price.

The controversy over the 'appropriate market price' that should be reflected in the publicly announced price is also ongoing. The core of the debate is whether the appropriate value that the publicly announced price should reflect is indeed the current market price. If the current market price is considered the appropriate price, it conflicts with the policy premise that the current market price is overvalued. The National Assembly Budget Office recently pointed out the need to review whether the publicly announced price system aligns with its original purpose in a similar context. The Budget Office estimated that the increase in holding tax due to the rise in publicly announced prices this year accounts for 88.2% (670 billion won) of the total and said, "Currently, a higher differential application of the market price reflection ratio is temporarily applied to high-priced multi-family housing, and it is necessary to review whether this aligns with the original purpose of the publicly announced price system." It also stated, "Considering the existence of information asymmetry, speculative transactions, and other abnormal transactions, discussions are needed on the scope of market price reflection when calculating the appropriate price."

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