Hong Nam-ki "Real Estate Price Regulations Must Be Careful"... No to New Contract Caps and Standard Rent

Washington Accompanying Reporters Meeting
Side Effects of Lease 3 Laws' 'Dual Pricing'... Deputy Prime Minister Hong "Will Clarify Direction of Supplementary Measures in China in November"

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is speaking at a meeting with accompanying reporters on the 14th (local time) at the Fairmont Hotel in Washington D.C., USA. (Photo by Ministry of Economy and Finance)

[Washington D.C. (USA) = Asia Economy Reporter Son Sunhee] The government has expressed a negative stance on the introduction of the real estate 'ceiling on new jeonse and monthly rental contracts' and 'standard rent.' These measures were proposed as alternatives after the so-called 'dual price' issue arose, where jeonse prices differ by hundreds of millions of won despite similar property conditions following the implementation of the Lease Protection Act. However, the government plans to fundamentally exclude real estate measures based on 'price regulation.'

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, who is visiting the United States to attend the G20 Finance Ministers and Central Bank Governors Meeting and the International Monetary Fund (IMF), held a meeting with accompanying reporters on the 14th (local time) at the Fairmont Hotel in Washington D.C. He said, "Basically, policies that regulate market prices need to be approached cautiously," and regarding the possibility of introducing a ceiling on new contracts and standard rent, he stated, "I think it is not easy."

However, he still empathized with the need to prepare measures to address the dual price problem, which is considered a representative side effect of the Lease Protection Act, saying, "We are reviewing practical solutions by gathering opinions not only from the real estate department but also from the private sector," and added, "We will clarify the direction by the end of next month and announce it in December." He also emphasized, "The dual price issue (in jeonse prices) will realistically appear around July to August next year (two years after the Lease Protection Act was implemented). This means that the measures will not come just before the next government but that the Moon Jae-in administration intends to work together until the end of the year."

Although Deputy Prime Minister Hong drew a line against additional price regulations in the real estate market, the background of side effects such as dual pricing is also the Lease Protection Act's 'ceiling on jeonse and monthly rent,' which limits market prices, making it difficult to find solutions. Regarding this, Hong said, "It is not that we reject criticism, but many benefited from the Lease Protection Act," adding, "There were parts where the policy effect was realized, but side effects also appeared." He further explained, "Since the measures concern issues such as changes in listings, measures for new tenants after the two-year jeonse period (concerns about excessive rent increases), and the problem of different jeonse prices within the same apartment, it means that 'tailored measures' are necessary."

Regarding the phenomenon where price stability is hardly achieved despite repeated real estate measures, he said, "Our real estate market has unique characteristics, including psychological and speculative factors, as well as supply and demand determinants," and added, "In that sense, 'expanding supply' is an undisputed priority in the short term."

On the background of the rise in real estate asset prices, Hong said, "I believe that a huge amount of funds flowed into the real estate market last year due to liquidity released during the COVID-19 crisis," but also noted, "(Going forward) the situation is no longer one where funds can flow in, and with interest rates rising, there is a considerable perception that prices have peaked."

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