[2023 Real Estate Outlook] Despite Everything, Reasons to Hope... Various Regulation Eases and Transportation Benefits

Regulatory Easing and Transportation Benefits: Can They Reduce the Decline?
Key Question: Will Loan and Subscription Regulation Easing Drive Real Demand?

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Seoyul] Despite the full-scale decline in real estate transaction prices this year, there are places where the decline can be somewhat defended next year due to deregulation of restricted areas and transportation benefits. In addition, the easing of regulations on subscription and loans is expected to provide some relief for genuine buyers' efforts to purchase their own homes.

First, in response to the continued transaction contraction this year, the government deregulated restricted areas three times in June, September, and November through the Residential Policy Deliberation Committee. As a result, since the 14th of last month, only Seoul and the adjacent areas of Gwacheon, Seongnam (Bundang and Sujeong), Hanam, and Gwangmyeong remain as restricted areas.

In addition, the Ministry of Land, Infrastructure and Transport is currently implementing follow-up measures for the "National Housing Stability Realization Plan" announced in August to expand the supply base in prime urban locations within this month, and the "Public Housing Supply Plan for 500,000 Units" announced in October to stabilize housing for youth and low-income groups. Related to this, plans to improve safety inspections for reconstruction projects are also scheduled to be prepared and announced within this month.

Attention is also focused on whether the easing of subscription and loan regulations can revive the purchasing sentiment of genuine buyers. To assist genuine buyers in acquiring homes, the government extended the deadline for disposing of existing homes from 6 months to 2 years after moving in for one-homeowners who won subscriptions under the condition of disposing of existing homes in speculative overheated districts. Furthermore, the Housing and Urban Guarantee Corporation (HUG) and the Korea Housing Finance Corporation (HF) have expanded their guarantees for interim payment loans, which were previously applicable only to homes priced under 900 million KRW, to homes priced up to 1.2 billion KRW starting from the 21st of last month.

Moreover, previously, the Loan-to-Value (LTV) ratio regulations were applied differently according to housing prices within restricted areas, but now, for non-homeowners and one-homeowners (under the condition of disposing of existing homes), the LTV will be unified at 50% regardless of housing price. In these cases, mortgage loans are allowed even for apartments exceeding 1.5 billion KRW within restricted areas.

In the metropolitan area, there is also a possibility that the decline will be reduced by region and complex due to the benefits of the Metropolitan Express Transit (GTX) and the 2040 Seoul Urban Basic Plan (Seoul Plan). Although there is much debate about the opening of GTX lines, the Ministry of Land, Infrastructure and Transport has promised the opening of GTX-A in the first half of 2024, GTX-B in 2030 (planned), and GTX-C in 2028 (planned). Areas near GTX stations in the metropolitan area have seen prices rise sharply last year and then decline, but considering the improved transportation to Seoul, positive effects are still expected around the stations. Additionally, the Seoul Plan, which passed deliberation on the 30th of last month and includes the abolition of the 35-floor height limit rule, is raising expectations for high-rise building plans in reconstruction complexes.

However, there are also voices calling for accelerating the pace of government deregulation. Ham Young-jin, head of the Zigbang Big Data Lab, said, "It is time to quickly adjust policies that have been used as tools to control housing prices during the housing market boom, such as deregulating Seoul restricted areas and easing excessive transaction regulations like resale and land transaction permission zones."