Deregulation Signals Raised Only Gangnam Housing Prices... Seoul-Province Polarization

Local Areas Face Sharp Increase in Listings and Worsening Accumulation of Unsold Properties

Seoul apartment prices have stopped declining after 11 weeks. Expectations for the new government's market-friendly policies, such as reconstruction and loan regulation easing, and the temporary exclusion of heavy capital gains tax on multiple homeowners, have increased buying inquiries, leading homeowners to raise their asking prices.

The market is responding in real time to Yoon Seok-yeol's real estate policy drive, summarized by expanded supply and deregulation and tax relief. However, the positive response is limited to Seoul, especially some areas in the Gangnam district. On the other hand, the local real estate market is experiencing heightened anxiety due to unsold properties and other issues. There is a need for sophisticated policies to resolve market polarization.

◇Local areas see a sharp increase in listings and accumulation of unsold units= According to the Ministry of Land, Infrastructure and Transport on the 8th, the number of unsold housing units in local areas reached 22,936 in February, a 12.4% increase compared to the previous month. The number of unsold units in local areas rose sharply from 16,201 in December last year to 20,402 in January this year, a 25.9% increase, and the upward trend continued in February. The slowdown is not limited to the sales market.

Due to a downturn in housing market outlook and a chill in the sales market, existing listings are also flooding the market. In Jeonnam, the total number of listings increased by about 17% from around 6,000 units at the beginning of the year to around 8,000 units, and in Chungnam, it rose by about 13% from 18,500 to 21,000 units. Busan, Daegu, and Ulsan also saw increases in listings by 11.6%, 11.4%, and 11%, respectively.

◇Reconstruction and tax relief boost... listings sharply decrease in Seoul= The number of unsold units in Seoul remains stable at double digits, with 54 units in December 2021 and 47 units in January and February this year. The number of apartment listings also decreased by 1.6%, from around 97,000 units at the beginning of the year to around 95,000 units. In the Gangnam area, asking prices are high or record highs are being set, especially in reconstruction complexes.

This series of phenomena is due to the recent Presidential Transition Committee's decision to temporarily exclude multi-homeowners from the capital gains tax surcharge and to reform the Reconstruction Excess Profit Recovery System (재초환), raising expectations of rising housing prices centered on Seoul. The recent active engagement of the Transition Committee's real estate task force in reforming real estate policies has also had a positive impact. Eun Hyung Lee, a senior researcher at the Korea Construction Policy Institute, said, "Excluding the capital gains tax surcharge will bring out some listings, but multi-homeowners will have to consider what to do with the profits earned. Ultimately, demand for a 'smart single home' centered on prime locations or flagship properties may strengthen."

◇Local areas plead "Please lift regulatory designations"= While Seoul's housing prices have turned upward on the back of deregulation winds, local areas are expressing a sense of crisis. Jeong Haeyong, Deputy Mayor for Economic Affairs of Daegu, visited the Transition Committee the day before to explain the local housing market situation, including the increase in unsold units, and requested the removal of the entire city from the list of regulated areas. He argued that housing prices surged mainly in the metropolitan area due to policy failures, but uniform regulations applied to local areas have caused cumulative side effects. Besides Daegu, this year alone, Ulsan, Gwangju, Pohang, Gwangyang, and Suncheon have also requested deregulation. Experts warn of local real estate contraction and call for more detailed measures.

Ko Joon-seok, CEO of J.Edu Investment Advisory, said, "Local real estate could collapse in the order that cherry blossoms bloom," adding, "For a soft landing, balanced development policies that can revitalize local economies must be prepared simultaneously." Regarding supply, he said, "If the supply of 2.5 million units materializes, it will inevitably deal a serious blow to the local real estate market," and added, "It is necessary to reestablish supply plans by predicting regional demand in the mid to long term, including controlling the volume of permits."

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