Gangnam-gu in Seoul Designated as Speculative Area

Gangnam-gu in Seoul and Gwangmyeong City in Gyeonggi Province in which the market price of house is soaring is due to be designated as `speculative area` as of next month. If so, a transfer income tax will be imposed based on the real price of a house and the expense of transaction will be increased to be double or triple.

And the area of Seo-gu and Yuseong-gu in Daejeon and Cheonan city in South Choongcheong Province, which are regarded as candidate places for the alternative administration capital, will be designated as `feverish speculation areas` and strictly prohibited the right of distribution from transferring to others for one year.

An officer of Ministry of Construction and Transportation said on April 18 that `the policy for the stability of the house market in Capital area and Chungcheong area`, would be set up and executed step by step.

And Ministry of Construction and Transportation together with Ministry of Finance and Economy and Local Governments will investigate on April 21 and 22 the price movement of apartments and the right of distribution in ten areas such as Gangnam-gu, Seocho-gu and Gangdong-gu in Seoul, Suwon City, Gwangmyeong City and Hwaseong City in Gyeonggi Province and Daejeon and Cheonan City in South Chungnam Province and Cheongju City in North Chungcheong Province, etc.

Ministry of Construction and Transportation will decide which area is `speculative area` and report them to the `Real Estate Price Stabilization Committee` that will be opened soon. A chief of city house department of Ministry of Construction and Transportation, Jung Chang-su said, “Designation of speculative area will be possible in early May because it should go through some procedures like being published in government newspaper.” He added, “Gangnam-gu and Gwangmyeoung City in Gyeonggi Province might possibly be the areas of ‘speculative area’ based on the result of analysis about the price movement of house in March alone.”

As the upward movement of house price in the area of Seo-gu and Yuseong-gu in Daejeon and Cheonan City in Chungcheong Province does not come to a stop, Ministry of Construction and Transportation is going to designate all the areas as feverish speculation areas and discuss the matter with Daejeon City and Cheonan City. These areas are already designated as a speculative area.

A speculative area is the region that the price-increasing rate of existing houses is far greater than the price increase rate or the national average house price. And a feverish speculation area is the area where application competition of an apartment that is going to be newly distributed shows too high. In such an area, the terms and conditions for the transfer of the distribution right will be stricter and qualification criteria are strengthened.

Jae-Seong Hwang Ki-Jeong Ko jsonhng@donga.com koh@donga.com