A History of Housing Market Interventions

Governments often step in to manage the housing market, sometimes with unintended consequences. The previous governance, under Moon Jae-in, implemented over 20 regulations aimed at curbing speculation. These included defining “real buyers” as actual residents, requiring relocation within six months of purchase, and prohibiting collateral loans for apartments exceeding ₩1.5 billion. Though, the average price of apartments in Seoul has as risen to ₩1.4 billion, with Gangnam exceeding ₩2 billion, suggesting these measures may not have achieved their goals.

New Restrictions Target Prime Real Estate

Recently, the Seoul Metropolitan Government designated Gangnam, Seocho, Songpa, and Yongsan districts as land transaction permit areas. This affects over 2,200 complexes, encompassing approximately 400,000 households, or 10% of Seoul’s total households. This action follows a prior announcement regarding a “Torso Zone” in Jamsil, Samsung, Daechi, and Cheongdam-dong, signaling a tightening of regulations within a month.

Apartments in the Crosshairs

The land transaction permit system has effectively become an apartment transaction permit, focusing solely on apartment buildings while excluding land, shopping malls, multi-family units, and detached houses.Originally introduced in 1978 to prevent land fragmentation during new city advancement,it was first applied to a city center in 2020,specifically the Daechi-dong area. This selective submission raises concerns about property rights and freedom of residence, especially as delays in the international Exchange Complex district and Hyundai Motor’s new building project have increased burdens on citizens.

Anti-market regulation, such as the Tohe, should be used to minimize only if it is unavoidable.
Mayor Oh Se-hoon, Seoul Metropolitan Government

Concerns Over Scope and Impact

The current regulations extend to entire districts, a scale unprecedented even during the previous administration. The decision-making process, involving Mayor Oh Se-hoon, saw a shift in strategy just days before the announcement, leading to an expansion of the regulated areas. This has resulted in inconsistencies,such as Yongsan-gu apartments being subject to regulations while those in neighboring Mapo-gu are not. even apartments that have not experienced price increases are now affected.

The designation is initially for six months, but as seen with the Samsamdaecheong area, reversing such measures can be challenging. Critics argue that these regulations are a knee-jerk reaction to rising housing prices and question how the government intends to address the potential side effects. The rationale behind the Seoul Metropolitan Government’s actions remains unclear to many.

The Broader context of Seoul’s Housing market

Seoul’s housing market remains one of the most competitive globally. According to recent data from the Korea Real Estate Board, apartment prices in Seoul have increased by an average of 7% year-on-year, despite previous regulatory efforts.This persistent upward trend underscores the challenges in effectively managing the market and highlights the need for thorough and well-considered policies.