Will Housing Prices Really Drop if the Capital Moves?... After Ministry of Land's Move to Sejong, Gwacheon Housing Prices Rise Further

Government Sejong Complex (Provided by the Ministry of the Interior and Safety)

[Asia Economy Reporter Lee Chun-hee] The ruling Democratic Party of Korea has hinted at relocating the administrative capital to Sejong to stabilize housing prices in the Seoul metropolitan area. However, despite the increase in relocated government agencies as the administrative city of Sejong is being actively developed, housing prices in Seoul and Gwacheon, an administrative city, have actually risen further.

Kim Tae-nyeon, the floor leader of the Democratic Party of Korea, suggested the possibility of promoting the administrative capital during the negotiation group representative speech at the National Assembly on the 20th, stating that it could "alleviate the overcrowding and real estate issues in the metropolitan area." This revives the controversy over relocating the capital 16 years after the Constitutional Court ruled in 2004 that moving the capital violates the customary constitutional law that "Seoul is the capital of the Republic of Korea."

After the Constitutional Court's ruling of unconstitutionality, Sejong transformed into an "administrative city complex." It was decided that most ministries would relocate except for the Blue House, the National Assembly, and some ministries, and the relocation began in September 2012. The first phase started with six ministries including the Prime Minister's Office, Ministry of Strategy and Finance, and Fair Trade Commission relocating, and the government Sejong complex was inaugurated in December of the same year. Gradually, all ministries except six excluded by the Special Act on the Administrative City Complex (Foreign Affairs, Unification, Justice, National Defense, Ministry of Gender Equality and Family) and the Ministry of SMEs and Startups located in the Daejeon government complex relocated to Sejong by last year, including the Ministry of the Interior and Safety and the Ministry of Science and ICT.

However, during this period, housing prices in Seoul continued to rise. According to the Korea Real Estate Board's monthly apartment sales price index on the 26th, Seoul's sales price index, which was 88.4 in September 2012, rose to 110.7 last month, an increase of 25.2% over eight years. Although there were brief pauses when the government implemented strong real estate regulations, the upward trend continued. Many public officials who owned homes in Seoul and the metropolitan area commuted to Sejong every morning by high-speed rail and bus while living in their existing homes.

Government Gwacheon Complex

In particular, the situation is similar in Gwacheon, Gyeonggi Province, which was effectively an administrative city with many departments such as the Ministry of Strategy and Finance, Ministry of Land, Infrastructure and Transport, and Ministry of Health and Welfare located in the Gwacheon government complex. Gwacheon's monthly apartment sales price index also rose from 87.9 in September 2012 to 112.7 last month, an increase of 28.2%, which is higher than Seoul's growth rate. Since the Gwacheon complex accounts for a significant part of the city's economy, for the argument that "the capital must be relocated to stabilize housing prices in the metropolitan area" to gain traction, housing prices in Gwacheon, where many departments relocated to Sejong, should have decreased, but instead, prices rose more steeply.

Looking at specific complexes, the increase is even greater. In Byeolyang-dong, Gwacheon, Gwacheon Jugong Complex 4, a 73.59㎡ (exclusive area) unit was traded for 442 million KRW in September 2012. Last month, the same size unit changed hands for 1.41 billion KRW. The price rose by about 1 billion KRW over eight years, a 219% increase. Nearby Gwacheon Jugong Complex 5's 103.64㎡ unit was traded for 650 million KRW in October 2012 and for 1.58 billion KRW on the 5th of this month, a rise of about 900 million KRW (143%).

An industry insider said, "Recently, high-ranking multi-home public officials have been choosing between Sejong pre-sale rights and Gangnam reconstruction apartments," adding, "Even if the administrative capital relocates, since companies still remain in Seoul, the government and ruling party probably know that it will be difficult to expect a stabilizing effect on housing prices in the metropolitan area."

The problem is that the current situation in Sejong is not very easy either. Sejong is the only non-metropolitan speculative area excluding 15 districts in Seoul. According to the Korea Real Estate Board's weekly apartment sales price index on this day, housing prices in Sejong rose 21.4% this year, the highest increase nationwide. In the survey as of the 20th, prices rose 0.97% compared to the previous week, showing the highest increase nationwide.

Moreover, the second and third highest nationwide increases were in nearby areas of Sejong: Gongju City (0.96%) and Gyeryong City (0.66%) in Chungnam Province. This is likely to further fuel the already hot real estate market in the surrounding areas.

A representative from real estate agency A in Dajeong-dong, Sejong, said, "Prices have been continuously rising recently, and expectations seem to be growing even more," adding, "Homeowners are raising their asking prices by about 100 to 200 million KRW." The head of real estate agency B in Janggun-myeon said, "All land listings that were out this week have been taken down," and added, "If the administrative capital relocation is decided, the Sejong urban area will expand, and the land market is already stirring with expectations."

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