Despite Deregulation, Market Remains Quiet... "Atmosphere Reversal Uncertain"

On the 14th, in a real estate-dense shopping area in Songpa-gu, Seoul, where the decline in real estate prices and the transaction freeze phenomenon continue, apartment listings with market prices are posted. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Kim Hyemin] Despite the government easing loan regulations and lifting restrictions on most areas in the Seoul metropolitan area, the real estate market remains cold. Incheon, Dongtan in Gyeonggi Province, and Anyang have effectively become non-regulated areas, but buyer inquiries are hard to find. Despite government measures, buyers continue to take a wait-and-see approach. This is largely due to persistently high interest rates and concerns over economic downturns, which strongly influence buyer sentiment.

On the 12th, a representative from real estate agency A in Pyeongchon-dong, Dongan-gu, Anyang, Gyeonggi Province said, "Local residents are relieved that the speculative overheating district designation has been lifted, but the lack of buyer inquiries is no different from before," adding, "There are occasional inquiries from homeowners asking whether they should raise their asking prices or if they can sell quickly if they put their houses on the market." A representative from real estate agency B in Dongtan New Town, Hwaseong, also said, "The period when the market reacts immediately after the government's announcement seems to be over," and added, "The lifting of restrictions will take effect from the 14th, and loan easing starts next month, so we need to observe the market sentiment until the end of the year."

House prices continue to decline. According to Real Estate R114, apartment sale prices in Seoul fell by 0.08% compared to the previous week. Newly deregulated new towns and areas in Gyeonggi and Incheon also dropped by 0.03% and 0.02%, respectively. Among the new towns, mainly first-generation new towns saw declines, with Pyeongchon down 0.14% and Dongtan down 0.01% compared to the previous week. In Gyeonggi and Incheon, prices fell in Bucheon (-0.07%), Siheung (-0.06%), Incheon (-0.05%), and Suwon (-0.05%) in that order.

When an area is deregulated, the two-year actual residence requirement for capital gains tax exemption on home sales no longer applies. Acquisition tax surcharges and property tax rates are also reduced. The loan-to-value ratio (LTV) can increase up to 70%. Restrictions on re-winning and resale of pre-sale rights are also lifted.

However, the market views that for practically non-homeowners, there is no significant change other than an increase in loan limits. Even this effect may be limited for low-income non-homeowners due to the continued Debt Service Ratio (DSR) regulations. Especially, the ongoing interest rate hikes, which currently dominate the market, are expected to limit the normalization of transactions.

Ye Kyung-hee, senior researcher at Real Estate R114, said, "While some real demand buyers with sufficient income and conditions may see some relief in transactions, it is unlikely that the market will easily escape its weak trend," and added, "If the transaction freeze and price decline continue, the timing for lifting restrictions on remaining regulated areas may also accelerate."

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