Additional Real Estate Regulations... Kimpo and Paju, Which Already Meet the Requirements, Are Questionable

<Controversy Over Additional Designation of Real Estate Regulation Areas Expands>

Following Minister Kim Hyun-mi, Vice Minister Park Seon-ho Also States Position

Gimpo: Regulation Possible Due to Rising House Prices Despite Falling Inflation
Paju: Expected to Be Possible in August After July Price Increase Survey Results Are Released

Hangang Metro Xi 2nd Phase in Geolpo-dong, Gimpo-si, Gyeonggi-do, scheduled for occupancy in July. The premium on pre-sale rights is reported to have increased as Gimpo-si was excluded from the June 17 measures. (Photo by Im On-yu)

[Asia Economy Reporter Lee Chun-hee] The Ministry of Land, Infrastructure and Transport (MOLIT) has repeatedly stated its intention to expand regulations at any time in the 'balloon effect' areas of the June 17 real estate measures, specifically pointing to Gimpo and Paju cities in Gyeonggi Province. However, controversy is expected during the actual designation process. In the case of Gimpo, it already meets the criteria for designation as a regulated area but has not yet been designated, while Paju is expected to meet the conditions no earlier than August.

On the 26th, MOLIT Minister Kim Hyun-mi appeared on MBC Radio and said, "We are continuously monitoring Gimpo and Paju, as well as other areas," adding, "If abnormal market signs appear, we will take action." Then on the 28th, MOLIT Vice Minister Park Seon-ho appeared on KBS and reiterated, "We are currently collecting data and investigating market sentiment in Gimpo and Paju," and suggested additional regulations by stating, "If the market situation meets the conditions, we can take immediate action."

However, both Minister Kim and Vice Minister Park also explained that "both Gimpo and Paju do not meet the regulatory area requirements," which sparked controversy. According to current law, the criteria for designating an overheated area within regulated areas include that the housing price increase rate over the past three months exceeds 1.3 times the consumer price inflation rate of the respective city or province, and among these areas, at least one of the following must be met: ▲an average monthly subscription competition rate exceeding 5:1 over the past two months ▲a 30% or more increase in pre-sale rights resale transactions compared to the same period last year over the past three months ▲housing supply rate or owner-occupied housing ratio below the national average in the city or province.

The consumer price index in Gyeonggi Province, where Gimpo is located, fell by 1.04% from 105.9 in February to 104.8 in May. Meanwhile, according to the Korea Real Estate Board's comprehensive housing sales price index, Gimpo's housing prices rose by 0.11% from 101.3 to 101.4 during the same period. Although the increase is slight, since prices fell, the basic condition is met. As for additional conditions, the number of pre-sale rights transactions in Gimpo from March to May increased by 131.0% to 910 cases compared to 394 cases in the same period last year, far exceeding the 30% increase criterion. This means regulation could have been applied at the time of the June 17 announcement.

A senior MOLIT official explained, "The Residential Policy Deliberation Committee, which decides on the designation of regulated areas, considers not only the recent three months but also the housing price fluctuation rate over the past year according to its guidelines," adding, "Gimpo's housing price fluctuation rate over the past year is 0%." In fact, Gimpo's housing prices showed an upward trend from November last year to April this year but experienced a significant decline from June to October last year, resulting in a 0.00% fluctuation rate over the past year.

However, as soon as the June 17 measures were announced, the phrase "Gimpo has become 'Gold-po'" circulated, highlighting the concentrated balloon effect, making it difficult for MOLIT to avoid criticism for causing controversy itself. Another MOLIT official acknowledged, "We are aware that Gimpo already meets the legal criteria for designation as a regulated area," but explained, "This is the result of considering various qualitative factors, including its status as a border area."

Balloon Effect Appears... Either Anticipated but Not Regulated or Unable to Regulate Immediately

The situation in Paju is the opposite. Housing prices in the area actually fell by 0.15% during the same period. Although MOLIT insists on 'additional designation at any time,' it is widely expected inside and outside the ministry that Paju will only be eligible for designation as a regulated area by August at the earliest. Currently, the designation of regulated areas is based on the Korea Real Estate Board's monthly sales price index, which is usually released on the first day of the following month. If Paju's housing prices rise by more than 0.10% in the June survey, regulation will become possible.

However, considering the timing of the sales price index calculation, it is unlikely that the price change announced in early next month will show a significant increase. The Korea Real Estate Board's monthly index is calculated based on the Monday of the week that includes the 15th of the month, covering one month. In other words, the June index covers the period from May 12 to June 15, which is before the June 17 measures.

In Paju, apartment prices rose by 0.27% in the week following the first survey after the measures on the 22nd. However, during the period from May 12 to June 15, prices fell by 0.03%. The effect of the June 17 measures will be reflected starting from the July trend survey. Therefore, it is highly likely that the basic condition for designation as a regulated area?'housing price increase rate exceeding the consumer price inflation rate of the city or province over three months'?will only be met in early August when the July survey is released. Since one and a half months have already passed since the measures, the overheating caused by the balloon effect may have already occurred.

A MOLIT official explained, "Designating regulated areas is a sensitive issue involving property rights restrictions," adding, "It is difficult to make a preemptive designation when the legal basic requirements are not met."

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