Gwangju Entire Area Removed from 'Adjustment Target Area'... Expectation for Housing Market Revitalization

[Asia Economy Honam Reporting Headquarters Reporter Yoon Jamin] The entire area of Gwangju Metropolitan City was fully removed from the regulated areas after about 21 months since December 18, 2020.

According to Gwangju City on the 21st, the Ministry of Land, Infrastructure and Transport held a Housing Policy Deliberation Committee meeting on the same day and decided to lift the designation of regulated areas in local metropolitan cities and provinces, as well as some speculative overheated districts in the metropolitan area. The effect of the removal will take place on the 26th.

In the Gwangju area, due to the spread of COVID-19 in 2020, with telecommuting, school closures, and suspension of restaurant and store operations, there were ▲increases in housing residence time and changes in lifestyle patterns leading to a preference for new and large houses ▲increased liquidity due to interest rate cuts for economic recovery ▲large-scale redevelopment such as the Uam 3 Complex and Shinga District ▲and the start of demolition for reconstruction projects.

Due to complex factors such as increased housing demand from relocating households, housing sale prices, housing transaction volumes, and transactions by outsiders surged, leading to the entire area being designated as a regulated area on December 18, 2020.

A regulated area is designated by the Minister of Land, Infrastructure and Transport when the housing price increase rate over the previous three months exceeds 1.3 times the consumer price increase rate, considering housing market conditions such as subscription competition rates, pre-sale right resale transaction volumes, and housing supply rates through the Housing Policy Deliberation Committee. Once designated, various restrictions apply, including household loans, taxation, resale restrictions, and subscription limitations.

Housing prices in the Gwangju area rose continuously for 106 weeks from the first week of July 2020 until the second week of July 2022 before turning downward from the second week of July 2022. This month, the housing price increase rate compared to the consumer price increase rate was 0.09 in Dong-gu, 0.01 in Seo-gu, -0.13 in Nam-gu, 0.18 in Buk-gu, and 0.09 in Gwangsan-gu, all far below the common designation criterion of 1.3 for regulated areas. Additionally, housing transaction volumes decreased, subscription competition rates declined, and unsold units expanded, showing a downward stabilization trend.

Kim Jong-ho, Director of the City Urban Space Bureau, said, “Since June, considering our city's real estate conditions, we have continuously recommended the full removal of the regulated area designation, and I believe this is a natural result for the residential stability of Gwangju citizens.”

He also emphasized, “We will continue to conduct close monitoring to actively respond to changes in the housing market to maintain market stability.”

With this removal of the regulated area designation, restrictions such as real estate mortgage loans (LTV) at 50% (for properties under 900 million KRW) or 30% (for properties over 900 million KRW), total debt service ratio (DTI) at 50%, and prohibitions on mortgage loans for households owning two or more houses or for non-residential purposes have been lifted, which is expected to revitalize the housing market.

However, it is necessary to observe to what extent the demand contraction caused by the current interest rate hikes will be alleviated, and there are concerns about price increases as the Housing and Urban Guarantee Corporation (HUG) has uniformly lifted the high pre-sale price management areas.

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