[In-Depth Look] Housing Demand and Regulatory Policies of Seoul Residents

Kim Deok-rye, Senior Research Fellow at the Korea Institute of Housing and Urban Research

The government’s regulatory policies, which began to curb apartment prices in Gangnam, Seoul, are spreading nationwide like wildfire. The government’s policy of designating regulated areas, intended to solve housing market price issues through pinpoint regulations, has expanded the scope of regulated areas?including adjusted target areas, speculative overheating districts, and private land price ceiling application zones?making it difficult to still consider these as pinpoint regulations due to the sheer number of regulated areas.

Recently, efforts have also been made to further subdivide the units for designating regulated areas. Currently, speculative overheating districts and adjusted target areas are designated at the city, county, and district levels. A revision is underway to designate regulated areas by breaking them down into smaller units such as towns, townships, and neighborhoods. Will expanding regulated areas and further subdividing designation units be able to stop the current upward trend in housing prices? Will it stabilize the anxiety spreading through the housing market amid heightened uncertainty? Probably not. The price increase trend may spread to unexpected areas, causing even more confusion for the government.

We need to start by considering the fundamental causes and purposes of these regulations. We should also examine why the housing market has not stabilized despite the government’s strong regulatory policies. It is necessary to diagnose the root causes of why the housing price surge is spreading to previously unexpected regions. This begins with understanding people’s housing needs.

Analyzing the 2019 Housing Survey released by the Ministry of Land, Infrastructure and Transport reveals that the reasons Seoul residents moved to their current homes are very diverse. The most significant reason is better facilities or equipment. Among all respondents, 18.2% answered that they moved because the facilities or equipment in their current home were better than in their previous home. Next are good locations with convenient transportation, amenities, cultural facilities, parks, and green spaces at 14.9%, proximity to work or job changes at 13.4%, homes already purchased (owning a home) at 11.4%, and appropriate housing size considering household circumstances at 10.2%. Other reasons include marriage or establishing an independent household (1.1%), redevelopment or reconstruction (3.5%), child-rearing and educational environment (2.7%), and living close to parents (4.3%), among others.

Seoul residents tend to move to homes with better facilities or equipment and better surrounding infrastructure rather than simply aiming to own a home. This trend is also reflected in future moving plans. About 10% of households living in Seoul plan to move. Among those considering moving within Seoul, 52% plan to move within two years, 38% within five years, and 10% after five years.

The most common reason for wanting to move is to relocate to a home with better facilities or equipment, accounting for 23.9%. This is a 5.7 percentage point increase compared to the 18.2% who cited facilities or equipment as the reason for moving from their previous home to their current one. In other words, Seoul residents increasingly want to move to homes with better facilities. If these desires are not reflected in policies, the policies will be difficult to succeed.

Among Seoul residents who wish to move, 85% want to resettle within Seoul. Only about 12% plan to move to the Gyeonggi area. Looking more closely at the preferred areas within Seoul, Gangnam-gu stands out at 8.2%, which may explain why housing prices in Gangnam-gu are difficult to control. Next preferred areas are Songpa-gu (6.7%), Eunpyeong-gu (6.2%), and Seongbuk-gu (6.1%). This explains why some northern parts of Seoul, in addition to the traditional Gangnam area, show strong housing price trends. Following these are Gangdong-gu (5.1%), Gangseo-gu (4.6%), Seocho-gu (4.3%), and Mapo-gu (4.2%). In Gyeonggi Province, preferred cities include Goyang-si (2.0%), Hanam-si (1.5%), Namyangju-si (1.1%), Seongnam-si (1.0%), and Yongin-si (1.0%).

Among those wishing to move, 61% prefer apartments. Forty-five percent want to own their home, and 41% prefer jeonse (long-term lease). Sixty percent want to move to a larger area than their current home, while 34% want to maintain their current housing area. Only about 12% prefer monthly rent, and just 7% want to reduce their housing area. This underscores the need to continuously supply apartments in Seoul that can be occupied as owned or jeonse homes with sufficient space. These housing needs cannot be controlled by regulations. As incomes rise, household compositions diversify, and society becomes more complex, people’s housing needs will only grow.

Let us closely examine the rapidly changing housing needs of people. From this, we must diagnose the current housing market and develop policy solutions for future housing market stability. Regulations are only short-term remedies. Regulations cannot satisfy or control people’s housing needs. Therefore, regulatory policies are not sustainable.

Kim Deok-rye, Senior Research Fellow, Korea Research Institute for Human Settlements