[The Editors' Verdict] Yoon Administration's First Real Estate Measures: Can Satisfaction Be Achieved at the First Attempt?

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho is delivering opening remarks at the 1st Real Estate Ministers' Meeting held at the Government Seoul Office in Jongno-gu, Seoul, on the 21st. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Jo Gang-wook] The Yoon Seok-yeol administration has unveiled its first real estate measures just over a month after its launch. This comes amid growing concerns about instability in the jeonse and monthly rent market ahead of the two-year anniversary of the Lease Protection Act, a legacy of the Moon Jae-in administration, set for August. The June 21 measures include plans to quell instability in the lease market as well as rationalize the price ceiling system to increase housing supply.

Notably, this policy focuses more on ‘improvement’ rather than ‘regulation’ of the real estate market. Unlike the previous administration, which wielded tax regulations as a sharp tool, the current strategy aims to stabilize the market by loosening regulations related to sales and loans and providing tax benefits to tenants. The policy is named the ‘Lease Market Stabilization Plan and Q3 Real Estate Normalization Tasks.’ The term ‘normalization’ implies that the policies implemented over the past five years under the Moon administration have distorted the market. The intent behind this measure is to correct those distortions, stabilize the market, and return it to normal.

The market’s initial response is positive. Since it is difficult to revise the three lease laws (Lease Protection Act, etc.) in the short term, easing the owner’s actual residence requirements, expanding policy support for jeonse loan programs, and increasing deduction rates are expected to somewhat reduce tenants’ burdens caused by multiple pricing. Additionally, relaxing the move-in requirements for mortgage loans and postponing the mandatory residence period for apartments subject to the price ceiling system until before sale are also seen as measures that will help increase the supply of rental properties.

Nonetheless, there are lingering disappointments. Public sentiment, which changed the government out of frustration with the Moon administration’s real estate policies, feels that regulations were not loosened enough. This is despite understanding that amending the three lease laws, which are considered the root cause of the distorted lease market, is not easy. Critics warn that the balloon effect of exempting actual residence requirements could activate gap investments and that housing supply may fall short of expectations, resulting in a half-measure policy. Expectations were high because deregulation and supply expansion were key pledges during the presidential election. This explains the strong market demand for swift follow-up actions.

The sharp criticism from the Democratic Party, which said the only difference is a focus on ‘tax cuts for the wealthy’ and likened the policy to ‘Taesan Myeongdong Seo Ilpil (泰山鳴動鼠一匹),’ may stem from this. This phrase means ‘The great mountain trembled, but only a mouse came out,’ implying that the announcement was grandiose but the results insignificant.

After the announcement, Land, Infrastructure and Transport Minister Won Hee-ryong proposed to the National Assembly, “To fundamentally stabilize the lease market, it is necessary to start discussions on amending the Lease Protection Act,” and suggested forming a discussion body such as a ruling-opposition-government consultative group. However, there was no response from the Democratic Party, which holds 170 of the 300 seats in the National Assembly.

One cannot expect to be satisfied after the first attempt. It is not easy to change or reverse the results of policies implemented over the past few years all at once. Minister Won said of the measures, “This is the first step toward normalization from an abnormal policy focused solely on burdens caused by excessive regulation,” and asked for patience. This is likely why. However, a hasty attempt to package the policy should be avoided. The assessment at the first real estate-related ministerial meeting of the new administration that “the market is maintaining stability due to past efforts” is premature. Wasn’t the previous administration the one that repeatedly made excuses and self-praise instead of sincere reflection and reform after real estate policy failures? The Yoon administration has yet to show much.

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