Government Takes Strong Measures to 'Control Housing Prices'... 36 Areas Including Paju, Busan, Changwon Designated as Adjustment Zones (Comprehensive)

Designation of Speculative Overheated Zone in Uichang-gu, Changwon
36 Adjustment Areas Including Busan, Paju, Cheonan
Significant Expansion of Regulatory Areas Nationwide
Designation Effective from Midnight on the 18th

(Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] The government has newly designated Uichang-gu in Changwon-si, Gyeongnam Province, as a speculative overheating district. Additionally, a total of 36 areas including 9 locations in Busan, 7 in Daegu, 5 in Gwangju, 2 in Ulsan, and cities such as Paju, Cheonan, Jeonju, Changwon, and Pohang have been classified as adjusted target areas.

As the recent rise in housing prices, which began in Seoul and other metropolitan areas, has spread nationwide, the government is interpreted to have taken strong measures to significantly expand regulated areas to stabilize the real estate market.

The Ministry of Land, Infrastructure and Transport (MOLIT) announced on the 17th that it decided to add these regulated areas after going through legal designation procedures such as collecting opinions from local governments and deliberations by the Housing Policy Deliberation Committee (Hujeongsim).

According to MOLIT, Uichang-gu in Changwon has been designated as a speculative overheating district. The dong (neighborhood) areas of Uichang-gu were entirely designated, while only Buk-myeon and Dong-eup in the eup/myeon (township) areas were included.

In Changwon, housing prices are rapidly rising mainly in apartment-dense areas of Seongsan-gu and Uichang-gu. The proportion of purchases by outsiders is increasing, and investments in high-priced new complexes and gap investments in older complexes are on the rise, showing an overall overheating trend. Accordingly, Changwon City also requested the government on the 6th to designate Seongsan-gu and Uichang-gu as adjusted target areas.

In response, MOLIT decided through this week's Hujeongsim deliberation to designate Seongsan-gu as an adjusted target area, but since Uichang-gu did not meet the quantitative criteria for adjusted target areas, it was designated as a speculative overheating district.

Adjusted target areas are selected among regions that meet quantitative criteria such as a three-month housing price increase rate exceeding 1.3 times the inflation rate, and are considered overheated or at risk of overheating after comprehensively considering various circumstances.

Although housing prices in Uichang-gu, Changwon are rapidly rising, most new complexes have completed occupancy, so quantitative criteria for adjusted target areas such as subscription competition rates and resale transaction volume ratios were not met.

Furthermore, the government designated 9 areas in Busan including Seo, Dong, Yeongdo, Busanjin, Geumjeong, Buk, Gangseo, Sasang, and Saha-gu; 7 areas in Daegu including Jung, Dong, Seo, Nam, Buk, Dalseo-gu, and Dalseong-gun; 5 areas in Gwangju including Dong, Seo, Nam, Buk, and Gwangsan-gu; and 2 areas in Ulsan including Jung and Nam-gu as adjusted target areas, totaling 23 areas in 4 metropolitan cities.

Additionally, 13 areas in 11 cities including Paju; Cheonan’s Dongnam and Seobuk-gu; Nonsan; Gongju; Jeonju’s Wansan and Deokjin-gu; Changwon’s Seongsan-gu; Pohang’s Nam-gu; Gyeongsan; Yeosu; Gwangyang; and Suncheon were grouped as adjusted target areas. The total number of adjusted target areas designated is 36.

MOLIT explained, "This time, considering market conditions, metropolitan cities and cities with populations over 500,000 will be designated as adjusted target areas if they meet quantitative criteria as much as possible, and for small and medium-sized cities with populations under 500,000, areas with high price increases and strong connectivity to neighboring regions will be designated."

(Photo by Yonhap News)

Considering the purpose of the amendment to the Housing Act, which allows designation of regulated areas at the eup, myeon, and dong levels, some eup and myeon areas were excluded from designation when there were significant differences in conditions within the region. Among eup and myeon, those included in this designation are areas with active housing transactions such as new housing site districts.

Also, some areas previously designated as adjusted target areas with housing price increases lower than the national average and no recent rapid rises were removed from the adjusted target areas. Accordingly, Incheon Jung-gu’s Eulwang, Nambuk, Deokgyo, and Muui-dong; Yangju-si’s Baekseok-eup, Nam, Gwangjeok, and Eunhyeon-myeon; and Anseong-si’s Miyang, Daedeok, Yangseong, Gosam, Bogae, Seoun, Geumgwang, Juksan, and Samjuk-myeon were released from regulated areas.

As a result, the number of adjusted target areas is 111, and speculative overheating districts are 49.

The designation of adjusted target areas and speculative overheating districts will take effect from midnight on the 18th.

When designated as an adjusted target area, tax burdens increase due to heavy capital gains tax on multi-homeowners, exclusion from long-term holding special deductions, and additional comprehensive real estate tax on owners with two or more houses in the adjusted target area. Also, the loan-to-value ratio (LTV) for mortgage loans is limited to 50% for houses under 900 million KRW and 30% for the excess amount. Mortgage loans for purposes other than actual residence are basically prohibited when purchasing a house, and subscription regulations are also strengthened.

When designated as a speculative overheating district, regulations on redevelopment projects such as transfer of cooperative membership status and resale restrictions on pre-sale rights are strengthened. The LTV is limited to 40% for houses under 900 million KRW and 20% for the excess amount. Mortgage loans for purposes other than actual residence are prohibited when purchasing a house, and subscription regulations are also strengthened.

The government’s large-scale designation of regulated areas such as adjusted target areas and speculative overheating districts comes about a month after designating seven areas including Haeundae and Suyeong in Busan, Suseong-gu in Daegu, and Gimpo-si in Gyeonggi Province as adjusted target areas on the 19th of last month.

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