Frozen Buying Sentiment... "Market Rebound Difficult Despite Deregulation of Restricted Areas"

"Urgent Sales Focused on Actual Buyers May Occur..."
Some Regret Selective Deregulation Areas

[Image source=Yonhap News]

[Asia Economy Reporter Cha Wanyong] As warnings about falling house prices sound due to consecutive interest rate hikes, the government has lifted regulatory zones (speculative overheating districts and adjusted target areas) in the outskirts of the metropolitan area and provinces. Experts gave a positive evaluation of this deregulation but predicted that the current transaction freeze is unlikely to rebound.

This is because non-homeowners are likely to maintain a wait-and-see stance due to perceptions of peak house prices and the burden of additional interest rate hikes, while multi-homeowners will find it difficult to purchase additional homes due to burdens such as acquisition tax. However, some experts also forecast that the market may temporarily move in certain areas such as Haeundae in Busan and Jeonju in Jeollabuk-do.

◆ "Excluding Seoul and the metropolitan area, limited impact" = On the 21st, the Ministry of Land, Infrastructure and Transport held the 3rd Residential Policy Deliberation Committee (Jujeongsim) and decided to lift the adjusted target areas in the outskirts of the metropolitan area and provinces, and to remove Incheon and Sejong from speculative overheating districts.

Accordingly, the five major provincial metropolitan cities?Busan, Daegu, Gwangju, Daejeon, Ulsan?and existing adjusted target areas such as Cheongju in Chungbuk, Cheonan, Nonsan, Gongju in Chungnam, and Jeonju in Jeollabuk-do all became non-regulated areas. Incheon’s Namdong, Yeonsu, and Seo districts and Sejong, which were speculative overheating districts, were adjusted to adjusted target areas. As a result, the number of speculative overheating districts decreased from 43 to 39, and adjusted target areas from 101 to 60.

These areas will now benefit from eased regulations in various aspects such as loans and subscription. First, the loan-to-value ratio (LTV) on mortgage loans will be expanded from 50% (for properties under 900 million KRW) to 70%. Mortgage loans will be allowed up to two per household (within a guarantee limit of 500 million KRW), and burdens related to real estate taxes such as acquisition tax and capital gains tax (with heavy taxation rates) will be significantly reduced. Resale of pre-sale rights will also be freer.

Nevertheless, experts express opinions that the impact on the market will not be significant. Due to the contraction of buying sentiment caused by interest rate hikes and concerns and expectations of falling house prices, it will be difficult for the market to move even if regulations are lifted.

Professor Seo Jin-hyung of Gyeongin Women’s University (co-representative of the Fair Housing Forum) said, “The market is showing a clear downward stabilization trend, so it will be difficult to lead a rebound with only this deregulation of adjusted areas,” adding, “There may be urgent sales transactions centered on actual demand, but market transactions beyond investment will be difficult.”

Researcher Lee Eun-hyung of the Korea Institute of Construction Policy said, “This regulatory easing is the most visible scale implemented under the new government,” but predicted, “The impact on the market will be limited as it is a gradual easing excluding Seoul and major metropolitan areas.”

Ham Young-jin, head of the Zigbang Big Data Lab, analyzed, “From the buyer’s perspective, the willingness to purchase due to deregulation is not expected to be high,” adding, “Since the deregulation of adjusted target areas is concentrated more in provinces than in the metropolitan area, and with stagnant sales prices and high mortgage interest burdens, it will not be easy to purchase homes.”

Im Byung-chul, head of the Real Estate R114 Research Team, also predicted, “Although most provincial areas including some parts of the metropolitan area were deregulated in this review, the burden of rapid house price rises, sharp base rate hikes, and economic downturn effects will make it difficult for buying demand to recover, so the house price decline is expected to continue.”

◆ Concerns and regrets over selective deregulation and exclusions in some areas = On the other hand, some experts expressed regret over the selective deregulation of certain areas.

Professor Han Mundo of Yonsei University Graduate School of Political Economy and Finance and Real Estate said, “Deregulation in the current clear downward trend of house prices is the right policy direction, but some areas are concerning,” explaining, “Areas such as Haeundae, Jeonju, Anseong, Pyeongtaek, and Paju, which have not yet been adjusted, may send wrong signals to the market.”

Professor Seo Jin-hyung said, “It is regrettable that Seoul was completely excluded,” adding, “In areas like No, Do, Gang (Nowon, Dobong, Gangbuk), where the transaction freeze and house price decline are severe, quick measures seem necessary.”

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