Land Transaction Permit System, Cold Water in Yongsan... Fueling the Fire in Gangnam?

Yongsan Faces Sharp Cooling in Regulation Month
Nearby Balloon Effect Feared but Purchase Inquiries Stop and Transactions Minimal

Gangnam Shows Opposite Trend Ahead of Permit System Announcement
Record High Deals in Daechi and Samsung Areas

Experts Say "Gangnam Regulation Effect Uncertain
Mostly Residential Areas with High Volatility Due to Issues"

[Asia Economy Reporter Lee Chun-hee] "Overall, it has been stagnant. It's better than before the announcement of the Yongsan Railroad Maintenance Depot development plan, but it's hard to say it's particularly good." (Representative of B Real Estate Agency, Ichon-dong, Yongsan-gu, Seoul)

About a month after the government announced the public development of the Yongsan Railroad Maintenance Depot in Yongsan-gu, Seoul, and designated the surrounding area as a land transaction permission zone due to concerns about 'market stimulation,' the local real estate market is tightening. However, since the 23rd, Gangnam Daechi, Samsung, Cheongdam-dong, and Songpa-gu Jamsil-dong, which were designated as land transaction permission zones, have strong demand for sales and jeonse (long-term lease) due to school districts, leading to growing speculation that the same effect as near Yongsan Railroad Maintenance Depot may not occur.

The government implemented the land transaction permission system on 0.77㎢ covering the Yongsan Railroad Maintenance Depot and 13 redevelopment zones starting from the 20th of last month. This measure was taken following the announcement of the development plan for the depot site, which had been left vacant, on the 6th, based on the judgment that "there is a high risk of speculative demand inflow centered on reconstruction and redevelopment sites."

After this policy was announced, the briefly heated Yongsan real estate market entered a rapid cooling phase. A real estate official from Hangangno-dong, Yongsan-gu, said, "Even at that time, the buying inquiries that poured in right after the announcement stopped immediately as soon as the land transaction permission was mentioned," adding, "Since then, the market has been very subdued." The representative of B Real Estate Agency in Ichon-dong also said, "I thought it would recover, but it has become stagnant again," and added, "Although prices and transaction volumes have certainly risen compared to before the development plan announcement, it cannot be considered a significant increase."

Residential area in Seobu Ichon-dong. (Photo by Lee Chunhee)

In fact, in the case of the Shibeom Jungsan Apartment in Ichon-dong, which was expected to experience a balloon effect, no transactions have been recorded. Although this apartment was built on public land, it is known that even if only the surface rights (building) are traded, if the land area per household exceeds 18㎡, permission is required. However, among the total 228 households, 84 units with 39㎡ (exclusive area) and 49㎡ have land areas less than 18㎡, so they are not subject to transaction permission, and although a balloon effect was anticipated, transactions have long ceased.

Among the Hangangno 1-ga Samgak Mansion, which was also included in the permission zone, the 35㎡ units with small land shares that could avoid transaction permission were traded only twice on the day of the development plan announcement on the 6th and the 8th of last month, before the regulation announcement.

The balloon effect in neighboring areas was also not prominent. Although it is an adjacent redevelopment project, the 66㎡ riverside unit in Ichon-dong, which was excluded from the permission zone, was traded for 780 million KRW on the 10th. This is only a 25 million KRW increase compared to 755 million KRW in April. The 43㎡ unit in Dong-A Green in the same neighborhood was traded for 750 million KRW on the 6th, but this size has consistently been traded in the 700 million KRW range since September 2018.

Contrary to the Gangnam land transaction permission zones, where buying demand surged immediately after the announcement of the permission system and record prices were set, and where asking prices for houses with land shares under 18㎡ have risen even after the system's implementation, the Yongsan area is showing the opposite trend.

Apartment complexes in the Songpa-gu area of Seoul. [Image source=Yonhap News]

After the government announced on the 17th the implementation of the land transaction permission system for Daechi, Samsung, Cheongdam-dong in Gangnam-gu and Jamsil-dong in Songpa-gu, record high transactions occurred in the area, such as 3.5 billion KRW for a 121㎡ unit in Dongbu Centreville, Daechi-dong, and 2.81 billion KRW for an 84㎡ unit in Central I-Park, Samsung-dong. After the regulation was enforced, asking prices soared for units not subject to transaction permission due to small land shares, such as 27㎡ in Resentz, Jamsil-dong, Songpa-gu, and 31㎡ in Hillstate 1st Complex, Samsung-dong, Gangnam-gu.

Experts believe that while the land transaction permission system was effective in Yongsan, it is uncertain whether the same effect will appear in Gangnam due to the nature of the regulation. Lee Sang-woo, CEO of Invade Investment Advisory, analyzed, "Yongsan is mostly commercial areas under redevelopment with only some residential areas, so the effect of the transaction permission system is bound to be significant." He added, "Gangnam is mostly residential, and residential areas are subject to fluctuations due to issues regardless of the permission system, so it is difficult to predict whether the permission system will succeed."

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