Urgent Government's 'Massive Regulations' Fail to Calm Housing Price Anxiety... Strong Buying Demand U-Turns in Gangnam

Government Designates 37 New Regulatory Areas Nationwide
Ample Liquidity and Buying Sentiment Remain Unchanged
Ultimately, Seoul Gangnam Housing Prices Rise Again

[Asia Economy Reporters Donghyun Choi and Mune Won] Concerns are growing that the government's mass designation of 37 regions nationwide as regulated areas will only exacerbate side effects. This is because, in a situation where abundant liquidity in the market due to low interest rates and housing purchase sentiment have not been curbed, 'patchwork pinpoint regulations' inevitably cause another balloon effect. In particular, most major cities are designated as regulated areas, and there is a sense that real estate buying demand is turning back to the Gangnam area of Seoul.

Mass Designation Admits Failure of Pinpoint Regulation

According to the Ministry of Land, Infrastructure and Transport and the real estate industry on the 18th, the cities, counties, and districts designated as regulated areas the day before reached 37. This includes 23 districts in metropolitan cities such as 9 districts in Busan, 7 in Daegu, 5 in Gwangju, and 2 in Ulsan, as well as 36 regions nationwide designated as adjusted target areas, including Paju in Gyeonggi, Cheonan in Chungnam, Jeonju in Jeonbuk, Changwon in Gyeongnam, and Pohang in Gyeongbuk. Uichang-gu in Changwon was also designated as an overheated speculation district.

Compared to the designation of 7 areas including Haeundae-gu in Busan and Gimpo as adjusted target areas on the 19th of last month, the intensity and scope of regulations have significantly increased in just one month.

The government's strong move is interpreted as a sign of being flustered by the spread of rising housing prices from Seoul to the metropolitan area and beyond to local regions. Since previous clumsy designations of regulated areas caused balloon effects in neighboring regions several times, this time the intention is to completely block the flow of funds to places like Nam-gu in Pohang, Gyeongsangbuk-do, Gyeongsan City, and Suncheon in Jeollanam-do. A Ministry of Land official explained, "Considering market conditions, metropolitan cities and cities with populations over 500,000 were designated as much as possible if they met quantitative criteria," adding, "Small and medium-sized cities were also designated if the rate of increase was high and there was strong connectivity with neighboring areas."

However, in the market, this designation of regulated areas is being evaluated as the government itself admitting the failure of pinpoint regulation. Among investors, there is already analysis that the balloon effect may shift to areas adjacent to regulated regions such as Buk-gu in Pohang, Ilsan-Tanhyeon, and Wonju.

(Photo by Yonhap News)

Funds U-Turning to Gangnam Area Due to Excessive Regulated Areas

There is also an opinion that due to the excessive increase in regulated areas, market funds may circulate and head back to Seoul, including the Gangnam area. If the intensity of regulations is similar anyway, demand tends to return to markets with higher investment value. According to statistics from the Korea Real Estate Board, the increase rate of apartment prices in Seoul grew from 0.01% at the end of October to 0.04% this week. Especially, the fact that buying demand in the Gangnam area is reviving points to a serious atmosphere of rising housing prices.

In fact, in Seoul, buying demand is pouring into land transaction permission zones designated as pinpoint regulated areas at the dong level in June, such as Samseong, Cheongdam, and Daechi-dong in Gangnam-gu, and Jamsil-dong in Songpa-gu, increasing transaction volumes and pushing prices up. The land transaction permission zone is a system requiring permission when trading land over 18㎡ in residential areas and over 20㎡ in commercial areas within the designated region. It aims to allow only 100% actual residence transactions to prevent speculation such as gap investment, but along with various side effects, it appears to have lost its price suppression function six months after introduction.

According to the Seoul Real Estate Information Plaza, as of this day, apartment transaction volumes in November increased by 150%, 66.6%, and 114% compared to the previous month in Daechi, Cheongdam, and Jamsil-dong, respectively, with 15, 10, and 30 transactions. Even excluding the 28 contracts of 'Samsung World Tower' in Samseong-dong, which caused controversy due to bulk purchases, there were 10 transactions, three more than the previous month.

Record-high transactions are also continuing. In Daechi-dong, Gangnam-gu, Dongbu Centreville 146㎡ (exclusive area) set a new record high at 3.9 billion KRW on the 12th of last month. In Samseong-dong, I-Park's 168㎡ was sold for 4.2 billion KRW on the 7th, and 157㎡ was sold for 4.49 billion KRW on the 12th of last month, setting new all-time high prices by area.

The atmosphere is similar in Jamsil-dong, Songpa-gu. Resentz's 85㎡ (5th floor), which was sold for 2.03 billion KRW last month, was traded for 2.17 billion KRW on the same floor this month. Els 120㎡ (6th floor) also set a new record high for that floor at 2.7 billion KRW this month.

A representative from real estate agency A in Jamsil-dong said, "Even during the autumn peak season, transactions were scarce, but recently inquiries for purchases have increased sharply," adding, "Due to the designation of the land transaction permission zone, listings have become very rare, and as prices rise again in the Gangnam area, cautious buyers are now moving to purchase."

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