Designation of Regulatory Areas Expanding 'Buljang'... Increase in Local Apartment Purchase Ratio and Price Growth Rate

Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Kim Yuri] Last month, the proportion of apartment transactions in provincial areas reached the highest level this year. This is the result of a 'balloon effect' spreading to the provinces as housing regulations in the metropolitan area were significantly tightened. Price increases have been particularly noticeable in areas with a higher proportion of purchases by non-locals, leading to speculation that additional regulatory zones may soon be designated.

According to an analysis by Real Estate 114 of the Ministry of Land, Infrastructure and Transport's actual transaction price disclosure system on the 7th, as of the 3rd, the number of apartment sales transactions in provincial areas last month was 42,251, accounting for 70.9% of the nationwide apartment transaction volume of 59,576 during the same period. The share of apartment sales in provincial areas has been rising every month since the second half of the year, with 51.1% in July, 56.8% in August, 61.9% in September, and 62.8% in October, surpassing the metropolitan area. Last month, it exceeded 70%, marking the highest level this year. Conversely, the metropolitan area's (Seoul, Gyeonggi, Incheon) transaction share has declined for five consecutive months since June (54.2%), reaching 29.1% last month, the lowest this year.

This is analyzed as a result of the government's designation of most metropolitan areas as speculative overheated zones and regulated areas through the June 17 measures this year. Investment demand has shifted to provincial areas to avoid regulated zones where restrictions such as housing mortgage loan limits and strengthened taxation on multi-homeowners apply. In speculative overheated zones, mortgage loans for houses exceeding 1.5 billion KRW are blocked, and the loan-to-value ratio (LTV) for houses over 900 million KRW is limited to 20%. In regulated areas, LTV is 50% for houses under 900 million KRW, 30% for those exceeding 900 million KRW, and the debt-to-income ratio (DTI) is capped at 50%.

In provincial areas, a sharp increase in transactions was notable in Busan, Ulsan, and Gyeongnam. Last month, Busan recorded 9,702 transactions, Gyeongnam 5,579, and Ulsan 2,904. Although the 30-day reporting deadline has not yet passed, these figures have already far exceeded the transaction volumes for the same period last year. In November last year, the transaction volumes were ▲Busan 8,042 ▲Gyeongnam 4,869 ▲Ulsan 2,100.

These areas are also included among regions with a high proportion of purchases by non-locals. According to data from the Korea Real Estate Agency's nationwide housing price trend survey, among non-regulated areas, Ulsan, Changwon, and Cheonan have shown high housing price increases over the past three months. Ulsan rose by 2.32%, with Nam-gu increasing by 4.64%. Nam-gu's increase over the past year reached 10.05%. In Changwon, Seongsan-gu rose 4.38% over three months and 11.60% over the past year.

Accordingly, there is speculation in the market that additional regulatory zone designations are imminent. The Ministry of Land, Infrastructure and Transport is reportedly weighing the designation of regulated areas centered on these regions. However, the industry views that the 'whack-a-mole' style designation of regulatory zones could trigger another balloon effect, causing residential instability in more areas, and thus calls for more fundamental measures.

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