Planned deregulations give boost to sales of houses
The apartment complex, built in 1986, will be up for redevelopment in 2016 if the government’s real estate plan, announced on Sept. 1, takes effect. The proposed plan eases regulations on the redevelopment of apartments built more than 30 years ago.
The price of the apartment in Mok-dong has gone up due to the expectation that it will be reconstructed, market observers say.
“After the government’s announcement, houses are being sold as soon as they are put on sale and owners are calling for higher prices,” said Lim Kyu-man, president of Wooseok Real Estate in Mok-dong. “Both buyers and homeowners are keeping each other in check to get better prices, but overall, there are increasing expectations of price hikes.”
Indeed, rising housing prices and more transactions have been noticed across the property market, which has been trapped in a long recession.
The Park Geun-hye government’s economic team, led by Choi Kyung-hwan, the finance minister and deputy prime minister for the economy, believes that consistent increases in housing prices - within a reasonable level - will encourage consumers to spend and liven up the economy.
The government believes more transactions in the real estate market would give more business to related service industries such as relocation agencies. Tax revenues would go up with the rising housing transactions as more acquisition taxes are collected.
In September, the average price of houses nationwide rose 0.24 percent.
According to the Korea Appraisal Board (KAB), the national average of housing prices inched up 0.09 percent in August. Before last month, the biggest monthly increase of the year was 0.23 percent in March.
In the Seoul metropolitan area, where prices fell from April through July, a 0.31 percent rise occurred in September compared to the previous month.
“Thanks to the Sept. 1 plan, there has been some improvement in consumer sentiment to buy houses,” said Kim Se-ki, a director in charge of housing statistics at the board. “Adding to the 0.25 percentage point cut in the benchmark interest rate, growth in housing prices expanded further, especially in the Seoul metropolitan areas.”
The appraisal board also recorded an increase in the volume of sales transactions. According to its data, the total number of houses sold will reach nearly 90,000 this month, the same as in March and April.
The number of transactions rose in January, but retreated in February after the government announced a new tax on homeowners who make their income in lump-sum deposits.
The KAB said that the adverse effects of the February plan have been offset by the Sept. 1 announcement.
“The September plan has given positive signs for potential buyers to actually make purchases,” said Kim Kwang-seok, a research fellow at the Hyundai Research Institute.
A survey of 118 property market analysts, conducted between Sept. 5 and 12 by state-run Korea Land and Housing Corporation’s research center, showed analysts expected prices would continue climbing until the first half of next year.
About 66 percent of those surveyed said the sales price of houses across the country would go up slightly, while about 9 percent of them said prices would increase greatly.
In an earlier survey by the institution, about 51 percent of the analysts said housing prices would rise.
As much as 77 percent of the experts view the government’s Sept. 1 plan as part of its effort to remove unnecessary regulations.
However, whether the positive effects of the new plan will persist remains in question. Some in the real estate market worry that the effects will be temporary.
“There were high expectations that prices would jump after the Chuseok holidays, but the increase was less than expected, and some even declined,” said Chang Yu-sun, president of Haengun Real Estate in Gaepo-dong, southern Seoul.
“Compared to the same period last year, it is true there are more consumers asking to make purchases, but it is considered smaller than expected, given that there was such a big policy change,” said Cho Nam-hyun, president of Solomon Real Estate in Sanggye-dong, northeastern Seoul.
Analysts say that if five bills aimed at recovering the property market that have been submitted to the National Assembly are not passed soon, the market will fall back into a recession.
The five acts awaiting approval of their revisions are: the Income Tax Act, the Restriction of Tax Reduction and Exemption Act, the Housing Act, the Restitution of Housing Reconstruction Gains Act, and the National Housing and City Restoration Fund Act.
“If the bills are scrapped or the government’s plans are altered at the National Assembly, the market will be filled with growing uncertainties and might lead to another period of recession,” said Kim Dong-soo, an official at the Korea Housing Association.
BY SONG SU-HYUN AND CHOI SEON-WOOK
More in Economy
Tapped out and hunkered down, Korea stares recession in the face
Property owners get big tax shock
Household debt keeps climbing despite gov't efforts
Career interruptions due to marriage and childbirth down 11 percent
Despite vaccine shot in the arm, credit risk remains in markets