Rules to quash speculation are to be phased out
The Ministry of Land, Infrastructure and Transport announced the plan yesterday, reporting to President Park Geun-hye that it will lift 30 percent of around 2,400 regulations on the property market by 2017.
Since late last year, there have been signs of a recovery in the property market, owing to a handful of measures by the Park government to boost transactions of things like apartments and houses.
This time, the government wants to focus on boosting redevelopment of whole areas.
Three rules to be lifted as soon as this year date to the Roh Moo-hyun administration, when the real estate market experienced a speculative bubble.
One measure imposed a heavy burden on owners of apartments in redeveloped buildings or complexes.
The regulation was first adopted in May 2006 to cool down real estate speculations.
If the price of a person’s apartment rose more than 30 million won ($28,151) after redevelopment, the owner was forced to pay up to 50 percent of the increase as a levy.
Since 2008, the real estate market has been so flat that little redevelopment has been done and the measure has become outdated.
“Because housing prices have been stabilizing since then, the government decided to lift that regulation this year as part of normalizing an excessively regulated market,” said a ministry official.
Another regulation expected to be ended is the mandatory inclusion of smaller apartments in densely populated areas.
By law, a redevelopment project with a high-density population is required to make 60 percent of the newly constructed apartments smaller than 85 square meters (914 square feet).
Within that limit, city and provincial governments could add their own limits.
Seoul and neighboring governments have further tightened the regulation to require a portion of the apartments to be smaller than 60 square meters.
This helped depress the real estate market. By requiring a greater volume of small apartments in affluent areas in southern Seoul like Gaepo-dong and Jamsil-dong, where demand for bigger apartments is higher, transactions dropped and prices fell, according to realtors.
A renovation project in Gaepo-dong has been held up due to opposition to the regulation by nearby residents. They are worried that real estate prices in the neighborhood will decline across the board.
The ministry will eliminate local governments’ ability to set limits on the size of apartments in redevelopment areas. But the 60 percent restriction will, however, be maintained.
A ministry official explained that demand for smaller units is growing anyway because of the rise of single-person households.
“For consumers, there will be greater choices and for construction companies, the removal of the rule will help cut construction costs,” the official said.
The ministry will also eliminate the law that limits ownership of apartments in densely populated areas to one unit per owner.
In future redevelopment projects, people will be able to buy as many units as they want.
“The latest measures seem very opportune as people are eyeing some old apartments to be renovated amid runaway jeonse prices,” said Kwon Joo-an, a researcher at the Korea Housing Institute. “There is growing demand for redevelopments.”
Lifting the requirement for small apartments will improve the profitability of redevelopment projects, analysts said. And allowing investors to buy more units will also help tackle high prices for jeonse, or long-term deposits, by providing more supply, he added.
By song su-hyun [firstname.lastname@example.org]