[2·20 Real Estate Measures Q&A] "Did Not Consider General Election... No Disagreement with the Party"

Government Adds Suwon and Other Areas to Adjustment Zones
Loan Regulations Tightened in Adjustment Areas... Stricter Financial Controls
No Upgrade to Speculative Overheated Zones, Considering 'Voter Sentiment'

Housing Policy Officer Kim Heung-jin of the Ministry of Land, Infrastructure and Transport is announcing the results of the Residential Policy Deliberation Committee meeting on the afternoon of the 20th at the Government Sejong Complex in Sejong City. (Photo by Yonhap News)

[Asia Economy Reporter Moon Jiwon] On the 20th, the government newly designated Yeongtong, Gwonseon, and Jangan districts of Suwon City, Manan District of Anyang City, and Uiwang City as regulated areas. This is interpreted as a strong intention to actively block the 'balloon effect' that occurred after the announcement of the December 16 measures. In particular, in this measure, loan regulations for regulated areas have been further strengthened, drawing attention to whether the rapidly rising housing prices in Suwon and other areas will be affected.

The Ministry of Land, Infrastructure and Transport, the Ministry of Strategy and Finance, and the Financial Services Commission announced the 2.20 measures with this content at the briefing room of the Ministry of Land, Infrastructure and Transport Sejong Office on the 20th, stating that Yeongtong, Gwonseon, and Jangan districts of Suwon, Manan District of Anyang, and Uiwang City will be newly included as regulated areas.

From now on, loan regulations will be further strengthened in regulated areas. Previously, the loan-to-value ratio (LTV) for mortgage loans in regulated areas was recognized up to 60%, but from March 2, only 50% will apply to the portion under 900 million KRW, and 30% to the portion exceeding 900 million KRW. The purpose is to reduce the loan amount available when purchasing a house and to disperse investment demand.

Some have pointed out that designating only regulated areas without upgrading to speculative overheated districts might be considering the general election, but the Ministry of Land, Infrastructure and Transport emphasized, "We did not consider that at all," and added, "We prepared under the principle of managing the housing market stably and leading it to a market centered on actual demand."

Below is the Q&A with Kim Heungjin, Director of Housing Policy at the Ministry of Land, Infrastructure and Transport.

- Looking at the housing price increase rates over the past three months, Daejeon and Busan are also considerable. Was there no consideration for designating these local areas as regulated areas?

▲ We are continuously monitoring metropolitan cities in the provinces. Except for Busan and Daejeon, Daegu and Gwangju have relatively stable housing markets. In Busan and Daejeon, especially in Daejeon, price increases are high centered on Seo-gu, Yuseong-gu, and Jung-gu. The government is currently closely monitoring and taking a serious look at areas with high housing price increase rates.

- There are concerns that the balloon effect might appear in other areas even after today's measures. What is your view on this?

▲ It is a bit difficult to conclude that it is a (regulation-induced) balloon effect. There are various reasons for housing prices to rise. In the southern Gyeonggi region, where housing prices have recently risen significantly, the housing price increase rate was not that high before. It was widely recognized as relatively undervalued, and due to development prospects, investment demand was heavily concentrated.

We will continuously monitor areas not designated as regulated areas. If there is a risk of housing price increases expanding or spreading, we plan to take immediate additional measures such as designating additional regulated areas.

- Again, regulations are being strengthened by region, and loan regulations on regulated areas are being tightened. Are there additional measures being prepared for multi-homeowners?

▲ We are very cautious about implementing uniform nationwide measures. The government's basic policy direction is to respond in a tailored manner focusing on areas where investment demand is concentrated and housing prices are rapidly rising.

Also, when designated as a regulated area, capital gains tax and comprehensive real estate tax rates increase for multi-homeowners. Regarding financial regulations, mortgage loans are currently prohibited for those owning two or more houses in regulated areas.

- Did the novel coronavirus infection or the general election influence this measure?

▲ We did not consider COVID-19 or the general election at all. We prepared under the principle of managing the housing market stably and leading it to a market centered on actual demand.

- The designation of regulated areas starts on the 21st, but mortgage loan regulations will be enforced from March 2. There is about a ten-day gap; why is that?

▲ Regarding financial regulations, it takes some time for training bank counters and preparing systems, so it cannot be implemented immediately and will be enforced from the first week of March.

- There were forecasts that existing regulated areas such as Paldal in Suwon, Yongin, Suji, and Giheung, which showed significant price increases since the new year, would be upgraded to speculative overheated districts. They are not included in this measure; will prices be controlled then?

▲ In the areas you just mentioned, there are not many houses exceeding 900 million KRW, so rather than designating them as speculative overheated districts, strengthening the overall regulation level of regulated areas is judged to be more effective. Therefore, the policy direction was set to strengthen financial regulations in regulated areas.

- The ruling party has put brakes on several additional regulations. Did that affect the weakening of the intensity of this policy?

▲ There was no particular disagreement with the party. The party also shared the consensus that stabilizing the housing market and managing it centered on actual demand is important.

- Regulated areas were designated by district. However, even within Gwonseon District of Suwon, only areas like Homaesil-dong and recently redeveloped areas saw sharp price increases, while complexes with older houses were hardly affected. Shouldn't 'pinpoint designation' be done by neighborhood?

▲ We closely monitored market conditions by district. Although there are some differences among houses within the district, most of the district is filled with expectations of rising housing prices. If only specific neighborhoods were designated, there is a risk that housing prices in adjacent neighborhoods would move, so we designated the entire district more broadly.

- Are you considering additional supply expansion measures?

- We previously announced supply measures within urban areas, including the street housing maintenance project. We are currently preparing more concrete details on how the previously announced measures will operate and supply housing.