The Counterattack of the Land Transaction Permit System... 30-Pyeong Units in Dogok and Gaepo Nearing the '3 Billion Won Club'

Regulatory Balloon Effect in Areas Avoiding Land Transaction Permit System
Dogok Rexle 84㎡ Hits Record Price... Actual Transaction Price Rises by 500 Million KRW in 5 Months
Gaepo Honor Hills 84㎡ Also Hits Record Price... Asking Price Rises to 3 Billion KRW

[Asia Economy Reporter Onyu Lim] The designation of land transaction permission zones to curb housing prices in Seoul's Gangnam area is causing successive balloon effects. As demand concentrates in adjacent areas, the price of 30-pyeong (approximately 99㎡) apartments in Dogok and Gaepo-dong, Gangnam-gu, is poised to exceed 3 billion KRW. Some critics argue that the more the government introduces real estate stabilization policies, the more distorted the market becomes.

According to the Ministry of Land, Infrastructure and Transport's real transaction price disclosure system on the 19th, an 84㎡ (exclusive area) apartment in Dogok Rexle, Dogok-dong, Gangnam-gu, was sold for 2.88 billion KRW on the 15th of last month, setting a new record. This apartment was traded for 2.39 billion KRW as recently as May, but then recorded ▲2.4 billion KRW in June ▲2.6 billion KRW in July ▲2.8 billion KRW in August, maintaining an upward trend through October. The actual transaction price has risen by nearly 500 million KRW in just five months. A representative from a licensed real estate agency in Dogok-dong A said, "The asking price for 84㎡ units in the Royal-dong area is already at 3 billion KRW," adding, "At this pace, the actual transaction price is likely to exceed 3 billion KRW within the year."

In Gaepo-dong, adjacent to Dogok-dong across Daechi-dong, an 84㎡ apartment also approached 3 billion KRW in actual transaction price. The DH Honor Hills 84㎡ in Gaepo-dong was sold for 2.89 billion KRW on the 31st of last month, setting a record, and currently, there are listings with asking prices of 3 billion KRW on the market.

Frontline real estate offices attribute the sharp rise in housing prices in Dogok and Gaepo-dong, despite stringent regulations on high-priced and multiple-home owners such as the June 17 and July 10 real estate measures, largely to the designation of land transaction permission zones in neighboring areas. Previously, from June 23, the government designated four neighborhoods?Samsung, Cheongdam, and Daechi-dong in Gangnam-gu, and Jamsil-dong in Songpa-gu?as land transaction permission zones. In these areas, purchasing a house with a land area (including shares) exceeding 18㎡ requires approval from the local district office, and the buyer must reside in the property for two years after purchase. This blocked gap investments involving jeonse (long-term lease deposits) as well as purchases intended for future occupancy.

Since then, the market has seen a spillover effect benefiting apartments in nearby Dogok, Gaepo, Apgujeong-dong, and the Seocho-gu area, which were excluded from the permission zones. In particular, Dogok-dong, sharing school districts and academy zones with Daechi-dong across Seolleung-ro, experienced a pronounced concentration of demand.

Because of this, the industry criticizes the land transaction permission zone designation as a failed policy, similar to other regulations. Previously, apartments over 3 billion KRW for 84㎡ units were limited to certain complexes in Gangnam, such as Raemian Daechi Palace in Daechi-dong, Acro River Park and Raemian Prestige in Banpo-dong, and Acro Riverview in Jamwon-dong. However, government regulations have ironically spread this trend to Gaepo and Dogok-dong. An industry insider said, "In a market with abundant liquidity, whether for gap investment or actual residence, demand for apartment purchases is the same, but as the government tightened transactions in specific areas, balloon effects and market distortions occurred in Dogok and Gaepo-dong."

The implementation of the two lease laws?the right to request contract renewal and the cap on rent increases?has also been observed to push jeonse prices upward, which in turn drives up housing prices. According to the Korea Real Estate Board, nationwide apartment jeonse prices rose by 0.27% in the second week of November compared to the previous week, marking the highest weekly increase in seven years since October 2013. This has narrowed the gap between sale prices and jeonse prices. In Gangnam-gu, the jeonse price ratio (jeonse price relative to sale price) rapidly increased from 53.6% in September to 54.2% in October. In reality, the jeonse price for an 84㎡ unit in Dogok Rexle was 1.35 billion KRW in June, rose to 1.4 billion KRW in July, 1.5 billion KRW in September, exceeded 1.7 billion KRW in October, and currently has an asking price of up to 1.8 billion KRW. A real estate industry official said, "Due to the spread of jeonse difficulties after the two lease laws, jeonse prices in areas with excellent school districts such as Gangnam and Mok-dong have risen by hundreds of millions of KRW, supporting sale prices and creating an environment conducive to gap investment."

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