Except for 4 areas in Seoul and Gyeonggi, all regulatory zones lifted... but transaction normalization remains uncertain

The number of autonomous districts in Seoul where the average apartment sale price exceeds 50 million KRW per 3.3㎡ has more than doubled in one year. As of November last year, only Gangnam-gu, Seocho-gu, and Songpa-gu among the 25 autonomous districts in Seoul had average apartment sale prices exceeding 50 million KRW per 3.3㎡, but last month, Yongsan-gu, Seongdong-gu, Mapo-gu, and Gwangjin-gu were added, making a total of seven districts. The photo shows the view of Seoul apartments from 63 Square. Photo by Kim Hyunmin kimhyun81@

[Asia Economy Reporter Kim Min-young] Concerned about the negative economic impact caused by the sharp decline in real estate transactions, the government has lifted regulations on metropolitan areas except for Seoul and Seongnam, Gwacheon, Hanam, and Gwangmyeong in Gyeonggi Province. Due to high interest rates and a housing market downturn, housing transactions have frozen to a severe level, prompting the government to ease regulations to normalize transactions. However, experts believe there are limits to the recovery of the sluggish transaction market as long as the interest rate hike rally continues.

On the 10th, the government held the ‘3rd Real Estate Related Ministers’ Meeting’ including the Ministry of Strategy and Finance, Ministry of Land, Infrastructure and Transport, and Financial Services Commission, and announced measures to ease real estate market regulations. According to this plan, nine areas in Gyeonggi Province, including Anyang, Ansan Danwon, Guri, and Gunpo, were removed from the Speculative Overheated District designation. Sejong and 31 metropolitan areas (including Suwon, Ansan, Goyang, Namyangju, Hwaseong, Bucheon, Siheung, Gimpo, and Seongnam Jungwon) were removed from the Adjusted Target Areas. As a result, nationwide, all areas except the 25 districts of Seoul and Gwacheon, Seongnam (Bundang and Sujeong districts), Hanam, and Gwangmyeong became non-regulated areas. This is interpreted as a government measure to induce a soft landing in the real estate market amid the recent trend of falling house prices.

Previously, on September 21, the Ministry of Land, Infrastructure and Transport lifted regulations on all local areas except Sejong, leaving △15 Speculative Areas (Seoul) △39 Speculative Overheated Districts (Seoul and Gyeonggi) △60 Adjusted Target Areas. However, due to the continued transaction cliff caused by rising interest rates and the clear trend of falling house prices, additional deregulation was implemented after 51 days.

The deregulation measures will take effect at 0:00 on the 14th, upon publication in the official gazette. Once removed from regulated areas, restrictions related to housing transactions such as loans, taxation, subscription, and transaction (resale restrictions) will be significantly eased.

Experts positively evaluate the government’s intention to induce a soft landing in the market but believe it will be difficult for this measure to lead to transaction normalization. This is because there is a high possibility of further interest rate hikes, and the resulting weakening of buying demand means the market sentiment will not immediately reverse.

Ham Young-jin, Head of the Zigbang Big Data Lab, said, "The lifting of regulated areas means that obstacles related to subscription, credit, and taxation have been removed, but it does not provide additional incentives to transaction parties," adding, "Expecting a rapid transaction revitalization due to deregulation is limited, and from the buyer’s perspective, the willingness to purchase due to deregulation is not likely to be high."

Lee Eun-hyung, Research Fellow at the Korea Institute of Construction Policy, said, "Although regulations have been lifted in all areas except Seoul and its immediate vicinity, many regulations that the current government promised to normalize remain, so the impact of this measure on the market will be limited."

Experts believe that additional deregulation in areas such as taxation is necessary. Ham Young-jin suggested, "In addition to the broad deregulation of the metropolitan area, it is necessary to normalize the heavy taxation at the acquisition and transfer stages," and added, "Excessive transaction regulations such as resale restrictions and land transaction permission zones should also be eased. It is time to quickly revise policies that were used as tools to control house prices during the housing market boom."

Research Fellow Lee Eun-hyung advised, "It is time to discuss deregulation measures that have hindered market normalization beyond just lifting regulated areas."

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