"Expansion of Land Transaction Permit Zones Drives Sharp Rent Increases... Easing Needed Outside Gangnam"

Opposition Holds Seminar on "One-Year Evaluation of Lee Jaemyung Administration's Real Estate Policy"
"Expansion of Permit Zones Heightens Jeonse and Monthly Rent Instability...Partial Easing Needed"
"Triple Whammy: Sales, Jeonse, and Monthly Rents All Rising"
"Loan Regulations Allow Only Cash-Rich Buyers, Worsening Inequality"

An analysis suggests that the expansion of land transaction permit zones last year to cover all of Seoul and parts of Gyeonggi Province has contributed more to instability in the jeonse and monthly rental markets than to stabilizing the sales market. Critics argue that the policy, which was introduced at a time when the market was self-adjusting, led to side effects such as shrinking transaction volumes and a lack of supply.

At a seminar titled "Evaluation of Lee Jaemyung Government's One-Year Real Estate Policy and Future Tasks," held at the National Assembly Members' Office Building in Yeouido, Seoul, on the 18th, Professor Lee Changmu of Hanyang University said, "After the expansion of land transaction permit zones, the number of properties for sale decreased mainly in mid- to low-priced areas, and both jeonse and monthly rents increased." He added, "If it is not possible to lift the regulation entirely, easing it in areas other than Gangnam 3 Districts and Yongsan would help establish a stable trend in the jeonse and monthly rental markets."

In last year's October 15 policy, the government expanded the land transaction permit zones, previously focused on the Gangnam area, to cover all of Seoul as well as 12 areas in Gyeonggi Province, including Gwacheon, Seongnam, Hanam, Suwon, Anyang, and Yongin. Along with the expansion of these zones, the limits on mortgage loans within regulated areas were also reduced.

Real estate sale, jeonse (long-term deposit lease), and monthly rent listing notices posted at real estate agencies in Gangnam-gu, Seoul. Yonhap News Agency

Professor Lee analyzed, "Each time new regulations were introduced, the intensity of increases in jeonse and monthly rents became stronger," and explained that, "The imposition of a two-year mandatory occupancy period for properties in land transaction permit zones resulted in a reduction of private rental supply." He further pointed out, "While the target was high-priced apartments in Gangnam, actual instability appeared in mid- to low-priced apartment areas, leading to surges in jeonse and monthly rental prices."

During the first year of the Lee Jaemyung administration, apartment prices in Seoul rose in all categories: sales (from 5.98% to 8.79%), jeonse (from 1.96% to 8.66%), and monthly rent (from 3.57% to 8.35%). In the four Gangnam districts (Seocho, Gangnam, Songpa, Gangdong), the increase in sales prices was relatively limited, but the rise in jeonse prices was significant. In the northern districts such as Nowon, Dobong, and Seongbuk, there was a notable surge in monthly rents.

Professor Lee stated, "Although the government is focused on stabilizing sales prices, suppressing sale prices does not automatically stabilize jeonse and monthly rents." He described the current situation as a "triple whammy" where sales, jeonse, and monthly rents are all rising together. He was particularly concerned that instability in the jeonse and monthly rental markets could spill over to become a housing issue for young people. "There are signs that housing insecurity is shifting to the youth in the early and middle stages of their life cycle in Seoul," he said.

Participants are taking a commemorative photo at the discussion forum on "One Year Evaluation of Lee Jae-myung Government's Real Estate Policy and Future Tasks" held at the National Assembly Members' Office Building in Yeouido, Seoul on the 18th. Photo by Seo-yoon Choi

He also assessed that the heavier capital gains tax on owners with multiple homes and restrictions on single-home owners who do not reside in their property could lead to contracting transactions rather than expanding supply. Professor Lee commented, "The heavier capital gains tax on owners with multiple homes freezes transactions and strengthens demand for 'one smart property.' Non-resident single-home owners play a role as suppliers in the jeonse and monthly rental markets, and this function cannot be eliminated overnight."

Professor Jin Jangik of Chung-Ang University, who also attended the forum, highlighted the limitations of tax-centered policies, stating, "While the heavier capital gains tax aims to curb short-term speculation, in reality, it can discourage people from selling their homes, leading to a transaction freeze and a reduction in available properties."

The forum was co-hosted by the Special Committee for Normalizing the Housing Ladder of the Seoul Metropolitan Chapter of the People Power Party and the office of Assemblywoman Cho Eunhee. Oh Se-hoon, the Seoul mayoral candidate of the People Power Party, was also in attendance.

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