"Local Unsold Housing Floods, Please Lift Regulation Zones"

[Image source=Yonhap News]

President-elect Yoon's Deregulation of Housing Supply

Local Governments Demand Deregulation One After Another

Prolonged Decline in Housing Prices in Daegu and Others

Official Letters Sent to Ministry of Land, Infrastructure and Transport from Cheonan, Daejeon, etc.

[Asia Economy Reporter Kim Min-young] As President-elect Yoon Seok-yeol pushes for deregulation to increase housing supply, local governments are following suit by submitting requests to lift regulatory designations. Since last year, due to policies such as interest rate hikes, loan restrictions, and tax increases, housing prices in local areas have entered a downward trend and unsold homes have surged, prompting demands to remove these areas from regulatory zones.

According to local governments on the 11th, Cheonan sent an official letter to the Ministry of Land, Infrastructure and Transport on the 9th stating that it fully meets the conditions for lifting the designation as a real estate adjustment target area. Daejeon also requested the Ministry earlier this month to lift its designation as an adjustment target area and speculative overheating district. Not only Cheonan and Daejeon, but since the beginning of this year, local governments in Daegu, Jungnang-gu in Ulsan, Gwangju, Pohang, Gwangyang, Suncheon, as well as Dongducheon and Ansan Daebudo in Gyeonggi Province, have also requested deregulation from the Ministry.

Real estate regulatory areas are classified into three types: speculative areas, speculative overheating districts, and adjustment target areas. Among these, adjustment target areas under the Housing Act are designated or lifted by the Ministry of Land, Infrastructure and Transport through the Residential Policy Deliberation Committee when the market is judged to be overheated based on factors such as housing price increase rate, subscription competition rate, pre-sale right transfer volume, and housing supply rate. Inclusion in an adjustment target area imposes restrictions on subscription-related regulations, pre-sale right transfer bans, heavy taxation, and household loans. The Moon Jae-in administration designated 39 areas in Seoul and parts of the metropolitan area as adjustment target areas under the December 16, 2019 measures. Currently, a total of 111 areas have been designated as adjustment target areas.

Local governments raising their voices to be excluded from regulatory areas cite the recent decline in housing prices and the increase in unsold homes as justification. According to the Korea Real Estate Board, Dongducheon City in Gyeonggi Province, newly designated as an adjustment target area in August last year, saw its weekly apartment prices (as of the 13th) turn to a downward trend in December of the same year, halting the rise in housing prices. The same applies to Daegu. Apartment prices in Daegu have shown signs of a prolonged decline since November last year. Looking at the comprehensive housing sales price index from the Real Estate Board, the sales price index in local areas recorded 103.1 in November last year, then 103.3 in December, 103.5 in January this year, and 103.6 in February, showing no significant change.

The subscription market is also cooling down. According to the Ministry of Land, Infrastructure and Transport, the number of unsold homes in February increased by 12.4% from January to 29,636 units. There are voices claiming that the designation as adjustment target areas is worsening the unsold home situation. The Residential Policy Deliberation Committee meets twice a year, in June and December. It is highly likely to be held in June, shortly after the new government takes office.

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