'Regulatory Relaxation Pledge' Sparks Fire... Gangnam Reconstruction and Other Seoul Metropolitan Area Housing Prices Ignite

Jamsil Jugong Complex 5 Hits Record High in 7 Months
Gangnam Reconstruction Soars on Seoul Mayor Election's 'Deregulation Promise'
Government Pledges 'Unprecedented Supply' but Market Anxiety Persists
Rising Areas Like Yangju Also Stirred Up

Panoramic view of Jamsil Jugong Complex 5, Songpa-gu, Seoul

[Asia Economy Reporters Onyu Lim and Mune Won] Despite the government’s announced “drastic supply expansion,” the atmosphere is rather igniting housing prices in the Seoul metropolitan area. In particular, the “regulation easing” pledges that candidates from both ruling and opposition parties are competitively releasing ahead of the April Seoul mayoral by-election are increasing market anxiety.

According to the real estate brokerage industry on the 22nd, the Jamsil-dong Jugong Complex 5 in Songpa-gu, Seoul, with an exclusive area of 82.61㎡, has consecutively set new record prices at two-day intervals since the beginning of the year. On the 7th, it was traded at 2.466 billion KRW, and on the 9th, it changed hands at 2.481 billion KRW, which is 15 million KRW higher. Both prices are the highest ever recorded.

The rise in prices of these apartments, which had been tightly frozen due to the designation of a land transaction permission zone, is explained by local brokerage offices as being driven by the regulation easing pledges poured out by not only opposition but also ruling party mayoral candidates ahead of the by-election. In fact, former lawmaker Na Kyung-won of the People Power Party pledged to “streamline various reviews into a one-stop process for rapid reconstruction,” and Ahn Cheol-soo, leader of the People’s Party, also advocates easing redevelopment and reconstruction regulations such as floor area ratio relaxation. Even Woo Sang-ho, a member of the Democratic Party, expressed that “easing reconstruction regulations is not the answer” but indicated a willingness to “consider it more flexibly.”

A representative from Jamsil-dong A Real Estate Agency (licensed) said, “There are almost no listings,” adding, “Currently, there is one property with a less favorable orientation among the relevant area, but even that is not willing to sell for less than 2.5 billion KRW.”

The upward trend is also accelerating in reconstruction complexes in Gaepo-dong and Apgujeong-dong, Gangnam-gu, which last year avoided the two-year residency obligation by obtaining approval for association establishment. Apgujeong Shinhyundai 11th Complex, 183㎡, was traded at 5.2 billion KRW, exceeding the previous highest price by 300 million KRW.

Overall, the housing price rise is expanding throughout the Seoul metropolitan area. A balloon effect is appearing in areas that had been relatively excluded from the housing price rise, pushing up the rate of price increase. According to the Korea Real Estate Board, apartment sale prices in the metropolitan area rose by an average of 0.31% this week. This is the highest in 8 years and 8 months since statistics have been compiled.

Gyeonggi Province rose by 0.42%, increasing from 0.36% the previous week, and Incheon also expanded its rise from 0.36% to 0.40%. Although President Moon Jae-in declared at the New Year’s press conference on the 18th that he would present “drastic measures beyond expectations,” it has had no effect on market sentiment. In particular, Yangju (1.27%) in Gyeonggi Province and Deogyang (1.10%) in Goyang, which had been excluded from the housing price rise, have recorded over 1% increase for three consecutive weeks, showing signs of overheating in housing prices.

Experts diagnose that the policy’s supply expansion measures fall short of market expectations. The measures revealed so far ? △public redevelopment and reconstruction △high-density development around station areas △securing new housing sites ? are difficult to expect short-term effects, and there is also an evaluation that there is a lack of incentives to attract private sector participation in the actual implementation process.

Lee Eun-hyung, senior researcher at the Korea Institute of Construction Policy, said, “Demanders are asking for houses to be built ‘quickly and in large quantities,’ but the measures currently mentioned are in a different direction,” and forecasted, “It will be difficult to expect housing price adjustments at least until the first half of next year.”