[비즈한국] The Lee Jae-myung administration has unveiled powerful demand-suppression measures, designating the entirety of Seoul and parts of Gyeonggi Province as regulated areas and land transaction permit zones. This is the Lee Jae-myung administration’s third real estate package, following the June 27 measures, which limited mortgage loan caps to 600 million won, and the September 7 measures, which aimed to supply 1.35 million households over five years. With the significant expansion of areas subject to stringent loan regulations and mandatory residency requirements, transaction volumes and price volatility in these regions are expected to decline.
The government held a meeting of ministers related to real estate at the Government Complex Seoul on the 15th and announced its 'Housing Market Stabilization Measures.' This action follows the recent spread of instability in the housing market as housing prices and transaction volumes began to surge, centered around Seoul and parts of Gyeonggi Province. Minister of Land, Infrastructure and Transport Kim Yoon-deok stated, "If we miss the golden time for housing market stabilization, it will become even more difficult for the public to purchase their own homes and ensure residential stability," adding, "The government will prioritize housing market stabilization and all relevant ministries will respond with full force."
The core of this measure is the expansion of regulated areas subject to strict loan restrictions. The government is expanding the adjustment target areas and speculative zones—currently limited to Seoul's Gangnam, Seocho, Songpa, and Yongsan districts—to include all of Seoul and 12 regions in Gyeonggi Province (Gwacheon, Gwangmyeong, Suwon's Yeongtong/Jangan/Paldal districts, Seongnam's Bundang/Sujeong/Jungwon districts, Anyang's Dongan district, Yongin's Suji district, Uiwang, and Hanam). Once designated as a regulated area, the Loan-to-Value (LTV) ratio for non-homeowners and single-home owners planning to sell their existing home is reduced from the current 70% to 40%, and the Debt-to-Income (DTI) ratio is also tightened to 40%. In essence, it becomes difficult to purchase a home using loans. Additionally, regulations such as heavy taxation on acquisition and capital gains, as well as restrictions on re-winning subscriptions and resale of purchase rights, will also apply.
Land transaction permit zones, which mandate actual occupancy, are also being expanded. The government has expanded the land transaction permit zones—which previously covered only 27% (165㎢) of Seoul, including apartments in Gangnam, Seocho, Songpa, and Yongsan districts, as well as Apgujeong, Yeouido, Mok-dong, Seongsu-dong, rapid integration planning complexes, and public housing development districts—to cover the entire city of Seoul and the 12 regions in Gyeonggi. The scope of permits includes not only apartments but also row houses and multiplex housing where there is at least one apartment building within the same complex. In land transaction permit zones, transactions of land above a certain size require government approval. For housing, only purchases for the purpose of actual occupancy for two years or more are permitted, making 'gap investment'—buying a home while keeping it rented out—virtually impossible.
Additional loan regulations have also been introduced. The government has decided to lower mortgage loan limits for homes exceeding 1.5 billion won in the capital region and regulated areas. While the limit for homes valued at 1.5 billion won or less in these areas remains at the current 600 million won, the government will apply differentiated loan caps: 400 million won for homes valued over 1.5 billion won but up to 2.5 billion won, and 200 million won for homes exceeding 2.5 billion won. Furthermore, the stress interest rate for mortgage loans in the capital region and regulated areas will be raised from 1.5% to 3%, and if a single-home owner receives a jeonse (lump-sum deposit) loan as a tenant in these areas, the interest payments on the jeonse loan will be factored into their Debt Service Ratio (DSR).
Meanwhile, the real estate tax reform plan anticipated by the market was absent from this package. The government stated it would devise a plan to rationalize real estate taxes by considering principles of fair taxation and public acceptance, while also steering capital toward productive sectors. It plans to review the specific direction and timing of tax reform by considering its impact on the real estate market and tax equity. Additionally, the government will establish a cooperative system between the Ministry of Land, Infrastructure and Transport and the National Tax Service to respond to illegal real estate activities and will consolidate efforts by installing a real estate transaction oversight body under the Prime Minister, as previously announced in the September 7 supply measures.
Lee Eun-hyung, a research fellow at the Korea Institute for Construction Policy, commented, "The most significant aspect of this announcement is the expansion of regulated areas where loan restrictions are tightened. If regulated areas are expanded extensively, transaction activity will shrink, and price volatility will decrease. However, controversy is inevitable regarding how long these artificially suppressed effects can be maintained, and how to deal with price changes in new transactions even if volume plummets, as seen in the past."
Chae Sang-wook, CEO of Connected Ground, predicted, "The short-term impact of designating land transaction permit zones on a wide scale, along with loan and jeonse DSR regulations, will be sufficient. (Judging by the foreshadowing of tax reform) above all, the market will understand that the government has summoned the courage to aim for a market decline, not just stabilization. In the short term, it will lead to rapid stabilization, and in the mid-to-long term, it will likely manifest as increased holding taxes following transaction restrictions."