Seoul Mayor Oh Se-hoon Caught in Dilemma Between 'Deregulation' and 'Housing Prices'

Promised Speedy Supply Through Reconstruction Normalization, but Rising House Prices Pose Obstacle
Gangnam, Yeouido, Mokdong Reconstruction Complexes See 100M-200M KRW Price Hikes on Expectation Alone
If Blamed as Main Cause of Price Surge, Could Negatively Impact Next Year's Local Elections
Mayor Oh's Limited Room to Maneuver... Torn Between Caution and Urgency

[Asia Economy Reporter Onyu Lim] Newly appointed Seoul Mayor Oh Se-hoon has fallen into a dilemma between 'deregulation' and 'housing price stabilization.' During his candidacy, he promised speedy housing supply through the normalization of reconstruction and redevelopment, but the movements in reconstruction complexes are becoming unusual. In the case of reconstruction complexes in the Gangnam area, just the expectation of Mayor Oh has caused asking prices to rise by more than 100 million KRW. Mayor Oh is deeply concerned as he could be stigmatized as the main culprit behind the recent rise in Seoul housing prices, which had just stabilized. This is also why Mayor Oh recently stepped back by saying, "Actually, my statement about 'starting deregulation within a week' was an expression of will."

According to the Korea Real Estate Board on the 17th, the apartment sales supply-demand index in Seoul this week (based on the survey on the 12th) was 100.3, rising 4.2 points from last week (96.1) and surpassing the baseline (100). The higher the index exceeds 100, the more heated the buying sentiment is. This index had fallen below the baseline for the first time in four months just last week, but it bounced back above the baseline within a week, failing to maintain the downward trend.

Following the April 7 Seoul mayoral by-election, where Mayor Oh Se-hoon pledged deregulation of reconstruction, the buying sentiment seems to have revived mainly around major reconstruction complexes. A Korea Real Estate Board official explained, "After the election, asking prices rose and listings appeared mainly in reconstruction complexes in Gangnam areas such as Apgujeong, Mok-dong, and Yeouido."

In fact, around the time of Mayor Oh's inauguration, asking prices in reconstruction complexes clustered in Gangnam, Jamsil, Mok-dong, and Yeouido surged by 100 to 200 million KRW. The Eunma Apartment 84㎡ (exclusive area) in Daechi-dong, Gangnam-gu, which was actually traded for 2.32 billion KRW last month, now has asking prices up to 2.55 billion KRW. Asking prices have soared by 230 million KRW in just one month. The Jugong 5 Complex 82㎡ in Jamsil-dong, Songpa-gu, was traded for 2.681 billion KRW last month, and the highest asking price now reaches 2.8 billion KRW.

Given this, Mayor Oh's concerns about deregulation deepen in the face of the practical barrier of rising housing prices. If Seoul housing prices, which have just calmed down, fluctuate again due to reconstruction activation, it could face a backlash from public opinion in next year's local elections. In other words, Mayor Oh's 'speedy housing supply' inevitably requires speed control.

Mayor Oh's concerns were also reflected in his remarks on the first day of the work report. On the 12th, at the first work report session with the Housing and Architecture Headquarters, Mayor Oh requested, "Please report on ways to supply housing carefully and swiftly so that the housing supply signal can be sent." At the same time, he ordered, "Please prepare separate preventive measures for areas where there are concerns about real estate price increases, such as major reconstruction complexes and redevelopment along the Han River."

Choosing the 'mini reconstruction' called the street housing maintenance project site as the first field visit related to housing supply, rather than reconstruction, is in line with this context. Mayor Oh was scheduled to visit the Raumporea Apartment in Seongnae-dong, Gangdong-gu, a street housing maintenance project site, on the 13th. Although the schedule was canceled due to the COVID-19 situation, it was evaluated as an unexpected choice amid the heightened expectations in the reconstruction market.

Mayor Oh made a spectacular return as the head of Seoul City after 10 years by advocating large-scale deregulation for the private sector, but he has taken on the task of finding a solution that simultaneously satisfies the two propositions of 'speed' and 'prudence.'