Cap policy may define home market in 2007

To start 2007 on a happy note, it may be a good idea to avoid talking to Koreans about anything having to do with real estate. Even uttering the phrase “housing policy” may get you a pained look of anxiety ― that’s because 2006 was a nightmare for most Koreans, what with several changes in real estate policy, skyrocketing home prices and the government designating all of Seoul as a “speculative zone.” That sweeping designation means that people living in the huge metropolitan city ― about two-thirds of the nation’s population of 49 million ― would have to pay higher capital gains tax and face tighter restrictions on mortgage loans. Unfortunately, Santa Claus forgot to leave a great real estate policy on the front steps of the Blue House last Christmas, leaving politicians to quarrel over details of the government’s latest announcement ― which has been to set a cap on new home prices. Analysts in the real estate market anticipate that the cap policy will greatly affect the market and divide the new year into two parts ― before and after the cap policy is scheduled to take effect in September. Since the aim of the new policy is to bring down home prices, analysts say that smart people wanting to buy new houses will most likely wait until later this year. “Unless the buyer is desperate, he or he will probably wait for a unit that falls under the cap price plan,” said Kim Hak-gweon, head of Sejung Korea, a real estate consultant. Gwak Chang-seok, a senior official at Real Estate First, said that prices may go down, but people will still want housing in so-called “popular” areas. “The demand of people wanting housing in popular areas will overflow, and then drawing lots will be like choosing a lottery ticket,” he said. Because of the cap price system, however, construction companies will most likely try to sell their houses before September to get a better price, analysts point out. How will this affect the price of houses? Most analysts agree that housing prices will continue to rise in 2007, because of overall decreases in available new housing. Another influential factor may be the confidence of the public in light of the 2007 presidential elections. In a report released last month, Hyundai Research Institute estimated that the amount of new apartment units available for occupation in the Seoul and Gyeonggi areas this year is about 21 percent less than last year. The report also pointed out that housing units available in places of high demand, such as Gangnam and Seocho districts in southern Seoul, will number only about a third of the new units available last year. However, because a large amount of new homes will be available in northern Seoul and satellite cities in 2008, the Hyundai Research Institute said that real estate prices will not go up drastically in a speculative manner because of low anticipation of profitability over the long term. That is, of course, if the policies don’t change again. Last year, real estate laws related to housing taxes and loans saw change on a seasonal basis. “The most important thing the government has to do is resolve the anxiety that people have, and see that consistent policies for an adequate housing supply and stable prices are reflected in the market,” said Lee Sang-young, head of Real Estate 114. by Wohn Dong-hee