[Q&A] Kim Hyun-mi "Will Continue Strong and Immediate Measures Anytime"

Minister of Land, Infrastructure and Transport Kim Hyun-mi is making an announcement regarding real estate regulation measures at the Government Seoul Office in Jongno-gu, Seoul on the 17th. Photo by Kang Jin-hyung aymsdream@

[Asia Economy Reporter Chunhee Lee] "If necessary, we will consistently continue strong and immediate measures at any time" (Kim Hyun-mi, Minister of Land, Infrastructure and Transport)

"Currently, the subscription market is basically based on the point system, and in fact, only those without homes are given the opportunity to win" (Kim Heung-jin, Director of Housing and Land Office, Ministry of Land, Infrastructure and Transport)

The government announced additional real estate regulatory measures on the 17th to curb soaring housing prices. The newly released '6.17 Measures' are evaluated as an unprecedented high-intensity regulation following the December 16 measures last year. Regarding concerns about the 'balloon effect' raised by some, Minister Kim Hyun-mi stated, "We will consistently continue strong and immediate measures," expressing the intention to take additional actions immediately if further movements in the real estate market are detected.

Minister Kim made these remarks on the morning of the 17th at the Seoul Government Complex during a joint announcement with related ministries on 'Management Measures for Housing Market Stability.' She said, "With historically low interest rates and rapidly increasing liquidity re-entering the housing market, overheating phenomena are reappearing in Seoul, the metropolitan area, and some local regions." She pointed out the recent characteristics of the housing market overheating as ▲ a sharp increase in the proportion of purchases by corporations ▲ expansion of gap investments ▲ upward pressure on high-priced housing and reconstruction housing in Seoul ▲ and the effect of public development benefits.

Accordingly, Minister Kim emphasized the key points of this plan as ▲ expanding designated regulated areas ▲ designating land transaction permission zones in development-benefit areas ▲ blocking gap investments and protecting actual demanders ▲ strengthening requirements for association members' sales ▲ preventing speculation through corporations ▲ and faithfully implementing follow-up measures of the December 16 measures. In fact, the announced measures included designating almost all areas in the metropolitan area as well as regions in the provinces where overheating is a concern as regulated areas. Additionally, high-intensity measures such as designating Jamsil-dong in Songpa-gu and Samseong, Daechi, and Cheongdam-dong in Gangnam-gu, which are within the influence zones of the Jamsil MICE development project and Yeongdong-daero complex development project, as land transaction permission zones were included.

Finally, Minister Kim said, "The side effects of price increases caused by speculation directly translate into burdens on ordinary actual demanders," and added, "If necessary, we will consistently continue strong and immediate measures at any time."

Below is a Q&A session with Minister Kim, Kim Heung-jin (Director of Housing and Land Office, Ministry of Land, Infrastructure and Transport), Jung Jeong-hoon (Director of Property and Consumption Tax Policy, Ministry of Strategy and Finance), and Lee Se-hoon (Director of Financial Policy Bureau, Financial Services Commission).

Minister of Land, Infrastructure and Transport Kim Hyun-mi is making an announcement regarding real estate regulation measures at the Government Seoul Office in Jongno-gu, Seoul on the 17th. Photo by Kang Jin-hyung aymsdream@

- The current measures only include tax strengthening related to corporations. Some suggest the need for overall tax reform. What is your view?

▲ (Kim Hyun-mi) I have stated that if the announced measures are insufficient, we will prepare measures in various fields. The basic judgment is that if real estate yields are higher compared to asset markets, speculative demand is likely to intervene at any time. Also, a recent research report by the Korea Research Institute for Human Settlements on real estate-related taxes in other countries confirmed that Korea implements more diverse and detailed housing-related measures than other countries. Tax-related issues will be discussed in consultation with related ministries and the National Assembly.

- You said immediate measures will be taken if necessary, but areas like Daejeon and Cheongju in Chungbuk, designated as regulated areas this time, have already seen housing prices rise significantly. Some criticize this as a delayed designation. What is your opinion? Also, areas like Pohang and Gumi in Gyeongbuk, which were not designated this time, are mentioned as next candidates. What are the countermeasures against the balloon effect of regulated areas?

▲ (Kim Hyun-mi) If the current measures are judged insufficient, we will prepare various institutional countermeasures and respond at any time.

- Daejeon was designated as a speculative overheating zone this time. There were criticisms that it had been overheated at the level of adjusted target areas since last year. What prompted the immediate designation as a speculative overheating zone?

▲ (Kim Heung-jin) Last year, Daejeon's housing price increase rate was somewhat high. However, designating regulated areas involves practical transaction restrictions and other difficulties, so we had to cautiously designate to avoid harming genuine demanders. After designating some metropolitan areas as adjusted target areas in February, Daejeon continued to see price increases, making it unavoidable to designate it as an adjusted target area, and some parts were designated as speculative overheating zones.

- There is a suggestion to integrate the speculative areas managed by the Ministry of Strategy and Finance and the speculative overheating zones managed by the Ministry of Land, Infrastructure and Transport. Is there any progress on this?

▲ (Jung Jeong-hoon) Currently, the Ministry of Strategy and Finance and the Ministry of Land, Infrastructure and Transport operate three types of zones combined. We are reviewing the necessity and effectiveness of integrating or reorganizing their functions. We will inform you once finalized.

- When imposing reconstruction charges, only the publicly announced price is used as the basis at the start of the project, but at the end, prices of general sales units and acquisition prices of small housing are included, which has raised market concerns. Are there any plans to improve this?

▲ (Kim Heung-jin) The basis for calculating reconstruction charges is the overall housing price of the complex at the start of the project. At the end, the association's profit from the project must be calculated. This profit includes proceeds from association members' sales, general sales, and payments received for providing small rental housing to the public. Therefore, we are not currently considering revising this.

- The government's real estate policy direction continues to tighten regulations. There is a joke that "the entire country will become an adjusted target area." If adjusted target areas are insufficient, will you continue to escalate to speculative overheating zones?

▲ (Kim Heung-jin) Designating regulated areas significantly restricts transactions, so we are cautiously designating them. The reason for designating almost all of Gyeonggi Province as adjusted target areas is due to abundant liquidity and many development benefits such as the metropolitan area GTX. Many areas in Gyeonggi are judged to be under development influence, so we designated them broadly. We do not intend to designate all local areas as regulated areas. We will operate restrictions selectively in areas showing signs of speculative demand inflow and market overheating.

- Within regulated areas, almost all housing transactions require disclosure of funding sources. Isn't this effectively a transaction permission system?

▲ (Kim Heung-jin) The concept of a transaction permission system is to permit transactions based on their purpose. In this plan, transactions are freely allowed. However, it requires sufficient proof of how funds were procured for the transaction, so it differs somewhat from a transaction permission system.

- This measure seems likely to increase interest in the subscription market. There are already evaluations that Seoul and the metropolitan area are overheated. What is your view on overheating in the subscription market?

▲ (Kim Heung-jin) We are not preparing separate measures related to the subscription market. Currently, the subscription market is basically based on the point system, so only those without homes have the opportunity to win. Although the subscription market may be considered overheated, if signals that newly supplied housing at prices lower than market prices continue, even if competition rates are somewhat high, the housing market is expected to stabilize in the long term.