Real estate restrictions lifted outside greater Seoul and Sejong

Apartments in Sejong on Wednesday. [YONHAP]

All real estate restrictions have been lifted outside greater Seoul and Sejong.

In Sejong, Incheon and Gyeonggi, some restrictions have been eased.

Sejong will no longer be designated as a "speculative" district. It is now designated as a "monitoring" district, according to the Finance Ministry and the Land Ministry on Wednesday.

The tight regulations that have been applied since 2017 remain unchanged for Seoul.

Purchasers of apartments in Sejong will be able to borrow more for property purchases and will face fewer restrictions when selling the property.

Three districts in Incheon previously designated as speculative were freed of that designation.

The number of areas designated as speculative has been reduced from 43 to 39, while the number designated as monitoring was taken from 101 to 60.

The lifting of the regulations comes as the property market, which overheated during the Moon Jae-in administration, has become destabilized since Yoon Suk-yeol took office.

A committee — headed by the vice finance minister and with other government officials and market experts, including scholars — sets the designations.

The Finance Ministry noted that the committee members during their discussion noted the impact of the rising interest rates due to the central bank's tightening of monetary policy.

In the case of areas other than greater Seoul and Sejong, falling prices and empty flats have heightened the need for policy changes.

According to Korea Real Estate Board, apartment prices in Seoul have fallen 1.02 percent in the last three months, while in Sejong, prices dropped 3.76 percent and Incheon 2.01 percent.

The previous government designated areas with significant rises in apartment prices as speculative. Once the designated is made, various limitation are put into effect, including those related to financing.

Areas designated as speculative have the most restrictions.

All districts in Seoul and Sejong were designated as speculative in August 2017, just three months into the Moon government.

For those designated as speculative, the loan-to-value ratio is limited to 40 percent for apartments appraised at 900 million won or less. That figure drops to 20 percent for those appraised at 900 million won or more. For apartments appraised are 1.5 billion won or more, no loans are provided.

The bar is eased for apartments in areas designated as monitored, with a 50 percent ratio applied to those appraised at 900 million won or less and 30 percent for those appraise 900 million won or more.

The debt-to-income ratio for those designated as speculated is 40 percent, while those in monitored areas is 50 percent.

In speculative areas, a higher capital gains tax is charged to those owning three or more apartments.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]