'Confused Market' Over 'Late' Designation of Regulated Areas

[Asia Economy Reporters Yuri Kim, Onyu Lim] "A quick sale price was cut by 50 million won in one day, but transactions have completely stopped." (A representative from real estate agency A in Janggi-dong, Gimpo)

On the afternoon of the 19th, when Gimpo City in Gyeonggi Province, where housing prices surged due to the 'balloon effect,' was announced to be designated as a regulated area, the local real estate market was frozen. Quick sales with prices lowered by tens of millions of won appeared in various places such as Janggi-dong and Geolpo-dong, but there were no buyers stepping forward. A representative from real estate agency A in Janggi-dong said, "Several listings offering 'discounts for contracts made before the designation of the regulated area' appeared in the morning when the regulation was announced, but since the regulation took effect from the 20th, transactions have become difficult."

Gimpo experienced a short-term price surge as it avoided regulation while the entire Gyeonggi Province was designated as a regulated area under the June 17 real estate measures. This was because gap investors flocked to find the last 'non-regulated area' properties, and tenants who could not afford the soaring Seoul jeonse (long-term deposit lease) prices also gathered. According to the Korea Real Estate Board, apartment sales in Gimpo City last month were 2,373 cases, a 37.2% increase from the previous month (1,729 cases). The so-called 'bull market' unfolded, with housing prices rising by hundreds of millions of won in just a few months. For example, in Janggi-dong's Hangang Central Xi Complex 1, the 84㎡ (exclusive area) price rose from 485 million won in June to 675 million won in November, an increase of nearly 200 million won in five months.

Although transactions cooled immediately after the designation as a regulated area, opinions on future housing price trends are divided. A representative from real estate agency B in Geolpo-dong said, "The bull market in Gimpo actually lasted until October," adding, "Moreover, since it has been designated as a regulated area, if transactions shrink, price competition among sellers will occur, inevitably lowering housing prices." On the other hand, some forecasts expect housing prices in Gimpo to continue rising like other metropolitan areas due to transportation benefits such as the anticipated Metropolitan Area Express Train (GTX) and the ongoing jeonse shortage in Seoul.

The atmosphere is similar in Busan. From this day, Haeundae, Suyeong, Dongnae, Yeonje, and Nam-gu districts in Busan were designated as regulated areas. Among these, Haeundae, Suyeong, and Dongnae, collectively called 'Hae-Su-Dong,' were re-designated as regulated areas one year after the designation was lifted in November last year. A year ago, 'Hae-Su-Dong' was considered a region where the housing market froze and the real estate economy was sluggish. However, this year, housing prices surged mainly around major reconstruction sites and newly built complexes. For example, a 131㎡ unit in Samik Beach, Namcheon-dong, Suyeong-gu, was traded for 2.07 billion won (5th floor) this month. Compared to 1.07 billion won (7th floor) in October last year, just before the lifting of the regulated area designation, the price surged by 1 billion won. However, recently, some price adjustments have been made. An 84㎡ unit in this complex was reported at 1.527 billion won (9th floor) this month, but recent listings are offered at 1.5 billion won (low floor), 50 million won lower than the previous asking price. As a result, prices have already peaked and are showing a lull, with the government belatedly designating the area as a regulated zone.

The core reason for the rapid price surge in these areas over a short period is attributed to the balloon effect caused by the designation of regulated areas in the metropolitan area. When designated as a regulated area, the loan-to-value ratio (LTV) for houses priced under 900 million won is lowered to 50%, and for the portion exceeding 900 million won, it is limited to 30%. The debt-to-income ratio (DTI) is also reduced to 50%. Pre-sale rights resale is also strengthened, prohibiting buying and selling for at least six months up to the move-in date. Due to strong regulations on Seoul apartments, housing prices in the metropolitan area soared, and the government designated most metropolitan areas as regulated zones through the June 17 measures. As a result, idle funds with nowhere to go flowed to relatively less expensive local metropolitan cities. In fact, in major areas of Busan, the number of sales has recently increased significantly, and the proportion of non-local buyers has also risen. In Haeundae-gu, it increased by 2.8 percentage points from 15.7% last month to 18.5%, and in Suyeong-gu, it rose from 13.8% to 19.0%.

Experts analyze that the designation of regulated areas, the balloon effect, and the belated designation of regulated areas in regions experiencing the balloon effect will only have a temporary effect and will have minimal impact on market stabilization. Kim Hak-ryeol, head of Smart Tube Real Estate Research Institute, said, "In the case of Gimpo, since the market is especially centered on actual demand, the rate of price increase will decrease but prices will not fall." Shim Kyo-eon, professor of real estate at Konkuk University, said, "Measures should be taken to allow multi-homeowners' properties to enter the market, but the government is actually blocking this through tax strengthening, so it is not a fundamental solution for market stabilization."

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