Rent Prices Stall... Government Tightens Control to Stabilize Housing Prices

Gangnam Apartment Jeonse Prices Fall for the First Time in 45 Weeks
Ministry of Land to Launch Rental Support Team Next Month
Will Matt Prices Also Drop? Market Turning Point
However, Many Variables Including Election, LH, and Reporting System

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is delivering opening remarks at the 18th Real Estate Market Inspection Meeting of Related Ministers held on the morning of the 26th at the Government Seoul Office in Jongno-gu, Seoul. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Moon Jiwon] As the apartment jeonse prices in Gangnam-gu, Seoul, have turned to a downward trend after 45 weeks, signaling stabilization in the jeonse market, the government appears to be ramping up its supply measures again. This move is seen as a strategic effort to focus policy capabilities on stabilizing housing prices to dispel market distrust caused by land speculation by employees of Korea Land and Housing Corporation (LH).

According to a survey by the Korea Real Estate Board, this week, apartment jeonse prices in Gangnam-gu fell by 0.02% compared to the previous week, marking a decline after about 10 months. Jeonse prices in Songpa-gu also dropped by 0.01%, the first decline in about 11 months since April last year. However, many in the market believe it is still premature to conclusively judge market stabilization.

Government Ramps Up Policy Drive Again

On the 26th, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, held a real estate market inspection meeting with related ministers at the Seoul Government Complex, stating, "The rate of price increase in the real estate market is gradually decreasing," reaffirming the strong push for supply measures.

Deputy Prime Minister Hong said, "Measures to eradicate real estate speculation and prevent recurrence related to the LH incident will be announced early next week after consultations between the ruling party and government," adding, "This time, we are determined to root out typical illegal, irregular, and unfair speculation in the real estate market and are preparing fundamental measures."

Next week, the results of the second public redevelopment candidate site selection under the 5·6 measures will be announced, and the first urban project candidate sites proposed by local governments under the 2·4 measures will be disclosed. Deputy Prime Minister Hong emphasized, "Regardless of the LH incident, the government's consistent position is to shorten the housing supply schedule by even a single day through flawless follow-up supply measures."

The Ministry of Land, Infrastructure and Transport (MOLIT), the main ministry in charge, is also busy. Early next month, a Real Estate Transaction Analysis Planning Team will be established under the Land Policy Office. This team is an expansion and formalization of the Real Estate Market Illegal Activity Response Team and will be responsible for intensive investigations into various illegal real estate activities such as under-the-table contracts and irregular gifts.

Also, within next month, a Housing Lease Support Team will be newly established under the Housing Policy Office to manage the entire lease system. This team, previously under the Housing Policy Division, has been formalized into an official unit that functions effectively as a division. It plans to focus on managing the lease system comprehensively and lowering jeonse and monthly rent prices.

Minister of Land, Infrastructure and Transport Byeon Chang-heum is attending the 18th Real Estate Market Inspection Meeting of Related Ministers held at the Government Seoul Office in Jongno-gu, Seoul on the morning of the 26th. Photo by Kang Jin-hyeong aymsdream@

Variables Everywhere: Reporting System, Elections, and More

However, there are many opinions that it is difficult to assert that jeonse price stabilization will lead to overall real estate market stabilization. This is because there are many variables that could affect housing prices, such as the implementation of the jeonse and monthly rent reporting system, the end of tax-avoidance listings, the Seoul mayoral by-election, and investigations into public officials' speculation including LH.

In particular, concerns have been raised that the pilot operation of the jeonse and monthly rent reporting system in some ‘dong’ (neighborhoods) next month, which will be fully implemented after June, could stimulate jeonse prices. If the reporting system is introduced, landlords’ rental income will be fully disclosed, potentially reducing supply and causing jeonse prices to rise as a side effect.

There are also many opinions that the pre-sale of the 3rd generation new towns, starting in July, could face setbacks. An industry official explained, "Among the 3rd generation new towns, Hanam Gyosan and Incheon Gyeyang have already begun land compensation and progressed significantly, so there is no major issue, but land compensation in other areas may be delayed," adding, "Resident opposition to new town development has increased since the LH incident, which is a variable."

Unlike jeonse prices, the rise in apartment sale prices is increasing further, which is also a concern. According to data from the Korea Real Estate Board, apartment prices in the metropolitan area rose by 0.29% this week, an increase from 0.27% the previous week. There is speculation that buying demand may revive again after the June holding tax assessment date or the Seoul mayoral election. Ahn Myung-sook, head of the Real Estate Investment Support Center at Woori Bank, said, "Jeonse prices will be the most important variable for the market situation going forward," and added, "At least until the Seoul mayoral election, a wait-and-see stance is likely to continue."

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