Joseyeon "Government Real Estate Policy Yields Only Short-Term Effects... Regional Disparities Rather Widen"

[Sejong=Asia Economy Reporter Son Seon-hee] An analysis has revealed that the so-called '8·2 Measures,' under which the government designated real estate regulation zones (adjustment target areas, speculative overheating districts, and speculative districts) separately last year to implement policies, were not very effective in actually curbing housing prices. Areas where government regulations were strongly applied showed short-term effects only, while in the long term, the upward trend in housing prices was maintained.

Song Kyung-ho and Kwon Sung-oh, associate researchers at the Korea Institute of Public Finance, stated in their report titled "Analysis of the Impact of Government Real Estate Policies on the Housing Market" on the 24th, "As a result of multifaceted analysis of the effects of frequently used regulatory zone designations by the government, it was found that in Seoul, the existing upward trend in housing prices was not mitigated."

The report said, "The rate of increase in housing prices in speculative districts (speculative overheating districts and overlapping designated areas), where stronger regulations were applied, maintained the previously higher trend compared to other areas before the regulation was strengthened," adding, "Rather, after the regulations were strengthened, the speed of housing price increases accelerated, and the gap in housing prices between regions statistically significantly widened." However, it added, "The extent of the widened gap was not large compared to the previous housing price increase rates."

Furthermore, "Specifically, when analyzing by housing price and region, the rate of increase in housing prices in 'houses priced over 900 million KRW, the three Gangnam districts, and the core of speculative districts' was higher than that of 'houses priced under 900 million KRW, areas outside the three Gangnam districts, and areas designated as the periphery of speculative districts and speculative overheating districts,'" pointing out that "the gap in housing prices between regions and price ranges was widening, and the additional designation of regulatory zones through the 8·2 Measures did not mitigate this trend."

However, an investigation analyzing only three months before and after the implementation of the 8·2 Measures to verify short-term effects showed that the increase in housing prices was significantly moderated during the three months immediately following the regulation implementation. Yet, the magnitude of the regulatory effect (the degree of slowing in housing price increases) was not large compared to the existing rate of housing price increases.

This minimal policy effect was also observed in holding taxes such as the comprehensive real estate holding tax. The report stated, "Analyzing the period after the 9·13 Measures, which strengthened the progressivity of the comprehensive real estate holding tax, showed that the rate of price increases for houses with a publicly announced price exceeding 300 million KRW significantly decreased, and the rate of price increases for houses exceeding 600 million KRW decreased even more sharply," but added, "However, considering the upward trend before the measures, the degree of decrease in price increase rates after the measures is judged to be not large." It further noted, "Even when limiting the analysis period to three months before and after the measures, housing prices significantly decreased, but the magnitude of the decrease was smaller compared to the 12 months before and after the measures." In other words, the effect was temporary.

Associate Researcher Song said, "The designation of regulatory zones through the 8·2 Measures appears to have had the effect of temporarily slowing the rate of housing price increases in Seoul, but this effect was temporary and not large," and evaluated, "Ultimately, the 8·2 Measures did not mitigate the trend of widening gaps in housing prices between regions (speculative districts - speculative overheating districts, Gangnam - non-Gangnam) and by housing price range (over 900 million KRW - under) in Seoul before the implementation."