Regulatory Zones to be Lifted... Yoon Seok-yeol Government's First Housing Policy Deliberation Committee Meeting on the 30th

Photo by Asia Economy

As the local real estate market is identified as a downward factor for the housing market in the second half of the year, the first Housing Policy Deliberation Committee (Jujeongshim) under the Yoon Seok-yeol administration is scheduled to be held this week. Although many local governments are demanding the removal of regulated areas, the prevailing analysis is that it will not be easy for the government to play the large-scale deregulation card in the current situation where housing prices are stabilizing. There is speculation that phased deregulation is more likely to begin in some areas where unsold homes are accumulating.

According to the Ministry of Land, Infrastructure and Transport on the 28th, the government will hold the Jujeongshim on the 30th to review and decide on the removal of some regulated areas. Regulated areas are designated or deregulated based on a comprehensive consideration of quantitative evaluations such as housing price increase rates, trends in unsold homes, and subscription competition rates, as well as qualitative evaluations. Areas where the real estate market is overheated are designated as 'adjustment target areas,' and areas where speculation is rampant are designated as 'speculative overheated districts.' Currently, there are 49 speculative overheated districts and 112 adjustment target areas nationwide. Most regions, except Gangwon-do and Jeju-do, are designated as regulated areas.

Demands for deregulation are emerging nationwide, including Daegu, Sejong, Jeonju in Jeonbuk, Yeosu in Jeonnam, Cheonan in Chungnam, Jung-gu in Ulsan, and Gimpo, Yangju, Paju, Dongducheon in Gyeonggi-do. However, the possibility of the government deregulating these areas all at once is low. On December 30th last year, when the housing price rise was slowing down, the Jujeongshim maintained the regulated areas due to concerns about localized market instability. However, this time, warning signs in the local real estate market are particularly strong. When deregulating regulated areas, phased deregulation starting from local areas, excluding the metropolitan area where there is a risk of localized instability, is being discussed. Lim Byung-chul, chief researcher at Real Estate R114, said, "Deregulation can be considered first for areas like Daegu where apartment supply is steady and unsold inventory is continuously increasing."

In local areas, unsold homes have begun to appear mainly in regions with high supply in the first half of this year, and the initial subscription rate decline is also noticeable. The five major metropolitan cities and other local areas remain at about 80%, and Daegu, Incheon, and Chungnam have future three-year supply volumes at 76-113% compared to the previous three years (2018-2021). Kim Seong-hwan, associate researcher at the Korea Research Institute for Construction Industry, said, "There is a high possibility of additional unsold homes occurring mainly in areas with high supply."