Real Estate Regulation Areas to Be Detailed Down to Eup, Myeon, and Dong Levels

[Asia Economy Reporter Yoo In-ho] Starting next year, the criteria for designating real estate regulation areas will be subdivided from city/county/district to eup/myeon/dong. The review period for adjustment target areas, currently conducted annually, will also be shortened to six months.

On the 29th, the government held a Cabinet meeting and approved an amendment to the Housing Act that defines the criteria for designating regulation areas such as speculative overheated districts and adjustment target areas as 'city/county/district or eup/myeon/dong.'

This amendment comes in response to criticism that the existing designation of regulation areas at the city/county/district level resulted in regulations being applied even to areas where housing prices did not rise, causing unintended harm to genuine buyers. The current law does not separately specify the administrative district unit as a criterion for designating regulation areas.

In fact, when the government designated Jung-gu, Incheon as an adjustment target area in June, the uninhabited Silmido Island was also included in the designated area, sparking controversy. During the recent designation of 37 places as regulation areas, some local dong areas in provinces with no housing price changes or even price declines were included as adjustment target areas, raising calls for system improvement.

The amendment also stipulates that areas designated as adjustment target areas will have their designation status reviewed every half-year considering changes in housing price stability conditions, allowing for deregulation. There have been calls to shorten the review cycle of the Housing Policy Deliberation Committee due to the rapid surge in real estate prices, so as to respond promptly to the rapidly changing real estate market.

Additionally, public officials who received special housing supply in speculative overheated districts within administrative capital cities will be required to fulfill a residence obligation within five years, and a regulation mandating the Korea Land and Housing Corporation (LH) to purchase land lease-type sale housing has also been established.

However, industry analysis suggests it is uncertain whether changing the unit of regulation area designation will effectively block the recurring 'balloon effect.'

Even after the government designated 37 places nationwide as regulation areas at once on the 17th to block the balloon effect, side effects such as rising housing prices in nearby small and medium-sized cities have continued to emerge.

[Image source=Yonhap News]

In fact, transactions are concentrated in eup and myeon areas that were exceptions due to low housing price increase rates despite being within regulation areas. For example, Tongjin-eup, excluded from the adjustment target area designation in Gimpo under the November 19 measures, has five apartment complexes and three more complexes scheduled to move in from next year through 2023, showing signs of the balloon effect.

Since Gimpo City was designated as an adjustment target area on the 19th of last month, the most traded apartment in Gimpo City up to now has been 'Masong Hyundai 1st Complex' in Masong-ri, Tongjin-eup.

During this period, this complex recorded 12 transactions, surpassing the 10 transactions of 'Hangang Central Xi 1st Complex' in Janggi-dong, considered the top property in Gimpo. Housing prices also rose. An 84㎡ unit was traded for 230 million KRW (4th floor) on the 8th, setting a record price. The only current listing has a asking price raised to 270 million KRW (low floor).

There is even criticism that the continuous expansion of regulation areas, which increased the nationwide adjustment target areas from 39 at the end of last year to 118 within a year, has only increased market resistance.

Experts point out that alternatives are needed for this regulation area designation system. With 111 places nationwide designated as adjustment target areas, there are many exceptions, making it difficult to understand the regulations precisely, and since regulations are imposed only after housing prices have already risen, their effectiveness has diminished.

Kwon Dae-jung, professor of the Department of Real Estate at Myongji University, said, "The current regulation area designation system cannot fully capture the complex and chaotic situation of the real estate market," adding, "Non-regulated areas should be subject to pinpoint regulations, and once housing prices stabilize, regulations should be promptly lifted to increase regulatory flexibility and responsiveness."

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