The South Korean government added five locations in southwestern Gyeonggi Province – Yeongtong-gu, Gwonseon-gu, and Jangan-gu in Suwon, Manan-gu in Anyang, and Uiwang – on Thursday to the list of regions subject to real estate control, strengthening regulations, such as mortgage loan ratios and resale restrictions. These are the areas whose apartment units have been showing a drastic price increase, for example, recording over two percent of weekly price increase last week. A dedicated organization composed of the special judicial police will be formed to regulate illegal activities, such as the violations of the real estate transaction law and illicit gift scheme.
This is another new policy announced by the government to stabilize real estate prices two months after the measures introduced on December 16 last year. It is also the 19th time that the current administration put forward such measures. As people have limited options to invest their funds due to the December 16 measures, which has restricted loans to housing over 900 million won and raised tax, demands for housing in the southern metropolitan area rose, creating the “balloon effect” with the drastic price rise. The government is introducing another round of real estate regulations in response to this phenomenon. Amid the government’s continuous dependence on regulations whenever real estate prices increase, the entire nation will be put under such regulations and all real estate transactions will be monitored.
South Korean President Moon Jae-in said, “We will not be defeated in the war against real estate speculation,” in his New Year’s remarks on January 7, followed by his comment saying, “We will keep an eye on the balloon effect and come up with complementary measures at any moment,” during a press conference on last Friday. The government’s continuous introduction of complementary measures, despite its strong determination to stabilize real estate prices, is proof demonstrating how ineffective its real estate policies are. Moreover, the ruling party was against the newly introduced measures in consideration of the upcoming general elections, which has created more confusion in the market at the end.
Following the new measures, real estate prices in areas not targeted by the government this time, such as Incheon, Ansan, and Sanbon. It is a vicious cycle where the government adds regulations whenever prices rise. It is concerning that this will lead to a price increase in the entire metropolitan area and most major cities across the country will be designated as speculation-prone areas, just like in the Roh Moo-hyun administration. The Roh Moo-hyun administration came up with real estate regulations stronger than any other administrations in the past but they only led to a 57 percent price increase of apartment units in Seoul for five consecutive years in his 5-year presidential term. The government should reflect on whether it is repeating the same mistake without taking lessons from the past failure and redesign its real estate policies from the base.