[2023 Economic Policy] Ultimately Real Estate Regulation 'Free'... Cure or Poison?

[Asia Economy Reporter Cha Wanyong] The government will undertake a major deregulation effort starting next year to ensure a soft landing for the real estate market. On the surface, this aims to normalize excessive and punitive real estate regulations to guide the market toward a soft landing, but the focus is interpreted as an attempt to attract multi-homeowners and rental business operators back into the market to revitalize the stagnant real estate sector.

Experts regard this deregulation as inevitable to prevent a decline in real estate prices, but they raise doubts about its effectiveness. In particular, there are growing concerns that if not properly managed, side effects such as increased speculative activities and household debt could emerge.

Photo by Mun Ho-nam munonam@

On the 21st, the government announced the '2023 Economic Policy Direction,' which includes measures such as ▲easing the acquisition tax surcharge system for multi-homeowners ▲extending the exclusion of capital gains tax surcharges until May 2024 ▲relaxing short-term capital gains tax rates on pre-sale and housing rights (basic rates of 6-45% for over one year, 45% for under one year) ▲allowing mortgage loans for multi-homeowners in regulated areas (LTV 30%). Simply put, the intention is to lower the barriers for multi-homeowners to purchase homes to support real estate prices.

The government's move to ease loan regulations for multi-homeowners and rental business operators comes after continuous deregulation policies focused on non-homeowners and single-homeowners throughout this year failed to produce significant effects.

According to the Ministry of Land, Infrastructure and Transport, the cumulative housing transaction volume until October this year was 449,967 cases, a sharp 49.6% decrease compared to the same period last year. Real transaction prices also dropped by 10.44% from the beginning of the year to the end of October, marking the largest decline since the Korea Real Estate Board began compiling related statistics in 2006.

However, experts question whether lowering loan barriers for multi-homeowners, beyond just non-homeowner actual demanders, will have the expected effect the government hopes for.

Professor Seo Jin-hyung of the MD Business Department at Gyeongin Women's University said, “Even if regulations on multi-homeowners are eased, it is difficult to prevent a hard landing in the real estate market. The current market slump is due to economic uncertainty caused by high interest rates, so the market will not move immediately, and a long-term trend needs to be observed.”

Ham Young-jin, head of the Zigbang Big Data Lab, also predicted, “This deregulation measure will have limited impact on a short-term market turnaround and rapid recovery, but it is expected to somewhat help absorb some urgent sales and contribute to a soft landing of the market.”

Meanwhile, some experts have voiced concerns. They point out that this deregulation for multi-homeowners is a kind of last resort to revive the rapidly shrinking real estate market, and if economic conditions such as interest rates improve, problems like rapid house price increases could occur.

Han Mundo, adjunct professor at Yonsei University Graduate School of Political Economy, explained, “Given the global high interest rate environment, it is difficult for this policy to achieve short-term effects, and if the market is not properly managed after adjustment and the economy recovers, there are concerns about a surge in speculative forces leading to rapid house price increases and an increase in household debt.”