Another Late Response... Will Busan and Gimpo Be Designated as 'Adjusted Target Areas'?

Rapid Rise in House Prices in Non-Regulated Areas... Balloon Effect
Delayed Consideration of Regulated Areas... Belated Measures
Spread of Jeonse Crisis... Uncertain Timing for Countermeasures

[Asia Economy Reporter Moon Jae-won] Recently, housing prices in some non-regulated areas such as Busan and Gimpo have risen sharply, increasing the likelihood of these areas being designated as regulated zones. Unlike other metropolitan areas like Seoul, these regions have relatively weak regulations and are still perceived as relatively affordable, which has concentrated buying demand. The government is reviewing measures for the jeonse (lease deposit) market and additional designation of regulated areas, but it is expected to be difficult to avoid criticism of 'belated measures' and 'patchwork solutions.'

Looking at the weekly apartment price trend data released by the Korea Real Estate Board on the 13th, there is a clear upward trend in apartment prices in the metropolitan area and some local regions. In Busan, apartment prices have risen over the past three weeks by 0.30%, 0.37%, and 0.56%, respectively, showing an increasing rate of growth. The three-month increase rate is also 4.94%, ranking first among non-regulated areas nationwide.

"Control Busan housing prices"... Flood of complaints

Until last year, Busan's housing prices were declining, but after being removed from the adjustment target areas in November last year, prices began to rise. Additionally, as the government designated most areas in the metropolitan region as regulated zones through measures such as the June 17 policy, speculative capital flowed into Busan, where regulations are relatively weak and housing prices are reasonable.

Haeundae-gu and Suyeong-gu in Busan led the rise in apartment prices this week, increasing by 1.09% and 1.13%, respectively. Compared to the end of last year, prices in both areas have risen more than 10% within a year. On the Ministry of Land, Infrastructure and Transport's public opinion forum and the Blue House's national petition board, there is a flood of appeals to control housing prices in Busan. A complainant from Busan said, "The asking price for an apartment that was 400 million won has risen to 700 million won," pleading, "Please designate it as a regulated area."

Gimpo, the only area in Gyeonggi Province with a concentration of major apartment complexes that has not been designated as a regulated area, is also experiencing significant apartment price increases. Since June 8, prices have risen every week without exception, with the increase rate in the past two weeks approaching 4%, indicating a steep upward trend. The head of real estate agency A in Janggi-dong, Gimpo, said, "There are many inquiries from buyers coming from Seoul," adding, "Asking prices are rising, but there are not many listings."

Cities in the Chungcheong region such as Gyeryong, Gongju, and Seobuk-gu in Cheonan, which are close to Sejong, are also seeing significant housing price increases. In Seobuk-gu, Cheonan, prices have risen nearly 1% in the past two weeks. As buying demand concentrates in these non-regulated areas, the Ministry of Land, Infrastructure and Transport has begun considering designating them as adjustment target areas. Minister of Land, Infrastructure and Transport Kim Hyun-mi said at the National Assembly Budget Committee plenary session on the 10th, "We have confirmed through statistics that speculative capital is moving to metropolitan cities in the provinces to avoid regulations, and we are closely monitoring this." Although specific areas were not mentioned, the industry expects Busan, Gimpo, and Cheonan to be the targets.

[Image source=Yonhap News]

Regulation after housing prices rise... Will it be a belated measure?

The problem is that even if these areas are designated as regulated zones, it will likely be a 'belated measure.' In the past, the government has often responded to rising housing prices in specific areas with 'pinpoint regulations,' which frequently caused a 'balloon effect' where demand shifted to neighboring areas. There were many concerns that speculative capital would flow into Gimpo from the moment it was excluded from regulation.

Inside and outside the government, it is expected that the Ministry of Land, Infrastructure and Transport will soon announce measures to address the jeonse crisis along with plans to expand the adjustment target areas. The quantitative criteria for designating adjustment target areas are regions where housing price increases are more than twice the inflation rate or where subscription competition rates exceed 5 to 1. If Busan, Gimpo, and others meet these criteria, the Minister of Land, Infrastructure and Transport will convene the Housing Policy Deliberation Committee (Jujeongshim) to conduct a qualitative evaluation and make the final decision on designation.

Although the Jujeongshim is expected to be held within the year, if Gimpo and others are designated as regulated areas, speculative capital and actual demand buyers may again move to other metropolitan areas such as Seoul, so the schedule may be somewhat adjusted. An industry insider said, "Since housing prices have already risen significantly, it will be difficult to prevent damage to actual demand buyers even if the areas are belatedly designated as regulated zones," adding, "Especially in Busan, there is a possibility of political considerations intervening due to the upcoming Busan mayoral by-election next year."

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