‘Permission to sell’ was unnecessary confusion

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‘Permission to sell’ was unnecessary confusion

Published: 19 Mar. 2025, 20:00 Updated: 20 Mar. 2025, 12:27

Audio report: written by reporters, read by AI

This photo taken on March 18 shows apartment complexes in Seoul as seen from Namsan. [YONHAP]

Just over a month after Seoul lifted the land transaction permit system (LTPS) for the Jamsil, Samsung, Daechi and Cheongdam-dong neighborhoods, the city has reversed its policy. On Wednesday, the Korean government and Seoul City Hall expanded the LTPS zones to include not only the original areas but also all of Gangnam as well as Yongsan District. Following the lifting of the system, apartment prices in Gangnam surged, and overheating signs spread to surrounding areas. In response, the government and Seoul introduced a strong demand regulation policy to extinguish the flames. Under the LTPS, buyers are required to reside in the purchased property for two years, making gap investments — buying homes with lease-holding tenants — impossible.

The retreat from the LTPS after just 39 days has sparked criticism of City Hall's accountability. Mayor Oh Se-hoon apologized, "I deeply regret the unexpected surge in prices." If the market reaction was unforeseen, it raises questions of incompetence. The LTPS was lifted despite rising transaction prices during the spring moving season and a period of falling interest rates. Moreover, Seoul ignored the Ministry of Land, Infrastructure and Transport's cautious stance and made the decision without consulting the financial authorities responsible for loan regulations. This has led to accusations that the decision was a strategic move to win votes in the capital region ahead of an early presidential election.

On Wednesday, Minister of Land, Infrastructure and Transport Park Sang-woo described the move as a "pre-emptive response to stabilize the market," while Mayor Oh referred to it as a "policy commitment to swiftly address sharp price volatility." But what exactly constitutes a pre-emptive response or swift action? Last month, the average transaction price for an 84-square-meter (904-square-foot) apartment in Gangnam exceeded 2 billion won ($1.4 million), and Seoul's apartment transaction volume increased by 63 percent compared to the previous month. Even the Bank of Korea's Monetary Policy Committee expressed concerns about overheating in the real estate market due to the easing of the LTPS. It is evident that Seoul's inconsistent policies have destabilized the market, prompting belated emergency measures. Claiming this as a pre-emptive response is disingenuous.

The system is a tool to prevent price surges in areas slated for development. Applying it to control property prices in already developed areas like Gangnam raises concerns about a potential infringement on property rights. However, given the current instability in Seoul's housing market triggered by Gangnam, measures like the LTPS and loan regulations are somewhat unavoidable.

Policies aimed at garnering votes ahead of a potential early presidential election are not limited to this case. The ruling party has proposed abolishing heavy taxation on owners of multiple homes, while the opposition party has announced plans to ease the tax burden on earned income. Both parties are competing to lower inheritance taxes. While outdated tax systems should be updated and excessively burdensome taxes should be alleviated, tax incentives to boost real estate markets in suburban areas could also be considered. However, addressing only the flaws of specific taxes without a comprehensive blueprint for securing tax revenue risks undermining the overall tax system. Both ruling and opposition parties should refrain from engaging in populist competition.

Translated using generative AI and edited by Korea JoongAng Daily staff.