[NEWS IN FOCUS] Property market measures failing, more are threatened
Following a flurry of measures aimed at real estate speculation last week, the administration promises that it is ready to roll out more of the same.
On June 17, it restricted the use of certain loans for the purchase of properties in designated areas, increased the comprehensive real estate tax for companies owning rental properties, announced a doubling of the capital gains tax for these companies and required people buying housing in overheated or speculative areas to take possession of the properties within six months.
Now, it's saying that it is ready with the next salvo, if needed.
On Sunday, Kim Sang-jo, Blue House policy secretary to President Moon Jae-in, stressed that the government is willing to throw additional tougher regulations at the market.
“We haven’t used up all of [the government] policy means,” Kim said during the press briefing. “The Moon Jae-in government will mobilize every policy means in stabilizing the real estate market.”
The Moon administration has been waging a war against the real estate speculation since it took office in May 2017. As of last week, it has lobbed a total of 23 rounds of measures at the market.
This is the second largest number of real estate measures announced by an administration after those rolled out by the Roh Moo-hyun government. President Moon served as the top secretary at the Blue House under Roh.
In his New Year’s address, President Moon stressed that his government is determined to beat real estate speculation.
Some experts say the government’s latest measures are expected to have some effect, especially as they have the backing of the National Assembly, in which the ruling Democratic Party holds majority seats.
“Housing prices have recently shot up in unregulated areas where borrowing is unrestricted and in areas where corporate demand has been rising,” said Lee Kwang-soo, Mirae Asset Daewoo analyst. “The expansion of overheated speculative zones and tougher loan regulations will dampen investor demand.”
Unlike in the past, where opposition lawmakers often delayed, watered down or abandoned market stabilization measures, Kim said, with the ruling party now controlling the majority of the National Assembly, the government has significant leverage to push through its policies.
“The changing dynamics of the legislature has significant implications for the direction of real estate policies,” Kim said.
The effectiveness of the measures have been questioned by some.
“The government’s recent regulations in expanding the areas that will be regulated clearly show its determination to end the balloon effect,” said Kim Hyun-wook, analyst at Shinhan Investment, referring to phenomena in which the strict government restrictions in certain areas drive investors and property buyers to less restricted areas, pushing up the prices in these areas.
“Because of the increase in liquidity and low interest rates, and the regulation conditions in the greater Seoul area similar to those of Seoul, the pressure for apartment prices to rise in Seoul will likely increase,” Kim said.
The analyst added that areas in Gyeonggi that avoided being included on the lists will attract investors.
Since the government’s measures were announced, there have been numerous reports of prices rising Gimpo and Paju in Gyeonggi, which was not included on the list of regulated areas. Some of the apartments were reported to have been sold for 50 million won ($41,300) more than in the previous week.
Spikes have been reported in other areas.
Last week, several apartments in the Jamsil LLL neighborhood were sold for around 2.2 to 2.3 billion won. In January, the same apartments went for about 1.9 billion won, and sold for as little as 1.8 billion won in March and April during the height of the pandemic.
Aggressive buying of LLL apartments was credited by some as being the result of buyers trying to get in before restrictions hit the area.
A real estate agent in Jamsil said the phone was ringing off the hook over the weekend.
“The June 17 real estate measures like the ones before will inevitably result in a ballooning effect,” said Seo Young-soo, analyst at Kiwoom Securities. “As with the Dec. 16  measures, the bold policies will likely stabilize apartment prices in Gangnam, high-priced apartments and those in reconstruction developments, but apartments that are not included in the regulation as well as land and stores will see an expansion of demand that could spill over to other regulated areas as well.”
The analyst said that the measures have been ineffective because of excess liquidity due to lower interest rates, and added that policies have failed to impress because of previous policy failure. The administration no longer has credibility in the market.
Despite the government's efforts since 2017, apartment prices have been rising, especially in Seoul. According to KB Kookmin Bank, the average price of apartments nationwide in May 2017 was 320 million won. As of last month, it had hit 397 million won. In Seoul, the average apartment price rose 51 percent during that period to 915.3 million won.
The average apartment price in the Gangnam area, which includes Seocho and Songpa districts, has hit 1.1 billion won, up 50 percent during that period.
Apartments at Raemian Daechi Palace, which is located in the heart of Gangnam, go for 2.9 billion won, up from 1.65 billion won in May 2017. The owners of the apartment have seen the value of the units increase more than 1.2 billion won.
“Surging apartment prices have made both investors and real buyers anxious. The fear of missing out on rising prices has fueled purchases of expensive homes, as well as apartments, and that has driven up prices,” Kim, the analyst at Mirae Asset Daewoo, said. “The emergence of speculative buying by real estate corporations has caused a further distortion in the market.”
The latest measures are particularly unpopular with the young.
Much of the ire comes from the government's decision to block all avenues available to low- and middle-income households seeking to purchase apartments through jeonse, or long-term housing rental deposit, loans and the stricter restrictions on real estate redevelopment projects.
Many have opted for jeonse loans as the government has tightened its control on mortgages. But the latest decision to cut even jeonse loans was interpreted as a sign that only rich people with abundant cash will be allowed to buy houses in popular areas with good schools.
While more than 20 petitions were lodged at the Blue House in relation to the measures announced last week, most were targeting Land Minister Kim Hyun-mee.
One of the petitioners argued that the government’s measures have stripped them of the opportunity to buy an apartment and forcing them to live in rentals for the rest of their lives.
Blue House policy secretary Kim on Sunday said while it is difficult to satisfy every person, the government is currently working on changing some of the regulations to ease the burden on those that live on rent or own a single apartment.
“The government real estate measure principle is protecting the actual homebuyers,” Kim said. “We will come up with additional measures if needed after reviewing the difficulties mentioned.”
BY LEE HO-JEONG [email@example.com]