If Regulations Are Lifted, Won't House Prices Rise Again? "No Rebound Even If Lifted" [Q&A]

Ministry of Land, Infrastructure and Transport: "Downward stabilization must continue... Not in a hard landing phase"
"Transactions by actual buyers should be allowed... Normalization of regulations"

Photo by Asia Economy

Amid a nationwide decline in housing prices, the government has decided to lift the designation of 'adjustment target areas' for all regions except Sejong City. In the Seoul metropolitan area, the speculative overheating zone in Incheon, where the decline has been steep, will be lifted, but the adjustment target area designation will be maintained. Additionally, five areas including Dongducheon, Yangju, Paju, Pyeongtaek, and Anseong will have their adjustment target area status lifted. However, the current regulatory zones in Seoul will remain unchanged.

Although there are concerns that this deregulation could reverse the recent downward trend in housing prices, the government explained that the decision was made after comprehensively considering factors such as interest rate hikes and the macroeconomic environment. Some regulations were lifted in certain areas last June, but since then, there have been no signs of a rebound in housing prices. Below is a Q&A with an official from the Ministry of Land, Infrastructure and Transport on the afternoon of the 21st.

-- What is the background for deciding to lift regulations entirely in the provinces?

▶ Nationwide, the downward stabilization trend in housing prices continues, and transaction volumes are steadily decreasing. Considering macroeconomic conditions such as interest rate hikes, we have adjusted the regulatory zones this time. Some express concerns about a hard landing in the housing market, but we do not believe it has reached that stage yet. This easing is not intended as artificial economic stimulus at all. Given the downward stabilization and reduced transactions, we judged that regulations should be adjusted so as not to block normal transactions by actual homebuyers.

-- Then, is the goal of this adjustment to achieve a 'recovery to a level where actual homebuyers can transact'?

▶ Yes. The housing policy direction of the Yoon Seok-yeol administration can be described as normalizing abnormal regulations. Regarding the regulatory zones this time, the idea is to lift regulations to a level where normal transactions can occur.

-- In the provinces, all regulations except for Sejong have been lifted. Is there a possibility this could instead stimulate housing prices?

▶ We lifted regulations in some provincial areas last June. Since then, we have continuously monitored those areas, and both prices and trends have remained stable. At this point in time, we judged that this level of deregulation is acceptable.

-- Why are most regulations maintained in the Seoul metropolitan area?

▶ There is still abundant liquidity in the market. Especially in the metropolitan area, competition rates in the subscription market remain high, and unsold units are relatively stable. In other words, considering that buyer sentiment in the metropolitan housing market remains strong, we made a comprehensive decision.

-- If the metropolitan area downturn becomes full-fledged, is it possible to lift regulatory zones there as well?

▶ Yes. The regulatory zone system is not fixed. Designations are made and lifted repeatedly depending on housing market conditions. We plan to review this flexibly by comprehensively considering market situations.

-- Why was only the speculative overheating zone lifted in Sejong City, while the adjustment target area designation remains?

▶ We considered the subscription market situation. Sejong City is a place where subscriptions are possible nationwide. Of 100 new units, 60 are allocated to Sejong residents, but 40 are open nationwide. Therefore, there are almost no unsold units, and subscription competition rates remain high. We judged that lifting all three regulatory designations applied to Sejong City would be difficult. It is true that Sejong City has recently experienced the largest price drop. However, conversely, it is also the area that rose the most over the past two years. We see the large decline as a result of the large increase.

-- Minister of Land, Infrastructure and Transport Won Hee-ryong has repeatedly said that downward stabilization of housing prices is necessary. Do you think prices have fallen enough?

▶ There is a temperature difference between the metropolitan area and the provinces. Until recently, housing prices rose sharply mainly in the metropolitan area. We believe the downward stabilization trend should be observed a bit longer. However, the goal of this regulatory zone adjustment is not to lower housing prices. Regulations should not hinder normal transactions by actual homebuyers.

-- Is there a possibility of easing the ban on loans for houses priced over 1.5 billion won?

▶ At this stage, the government's focus should be on supporting normal housing transactions and homeownership for actual homebuyers such as low-income groups and young people. Easing regulations on high-priced houses, so-called luxury homes priced over 1.5 billion won, which are purchased by wealthy individuals, is not a matter for consideration at this stage.