Attention on Whether International Exchange Complex District, Apgujeong, Yeouido, Mokdong, and Seongsu Will Be Included
Some Zones Expected to Be Lifted in the First Half of This Year
City Says "Effects on Transaction Volume and Price Stabilization Diminish Over Time"
Experts Predict Short-term Increase in Transactions and Outside Investment After Cancellation
Seoul Mayor Oh Se-hoon has unveiled a groundbreaking regulatory rollback card by proposing the "lifting of land transaction permission (Toheo) zones." Attention is focused on whether areas including the International Exchange Complex District, as well as Apgujeong, Yeouido, Mokdong, and Seongsu in Seoul, will be included in the cancellation targets.
"Announcement on Toheo Zone Cancellation Soon"
A senior Seoul city official said on the 15th, "We plan to review the cancellation of Toheo zones comprehensively, but we need to examine a bit more carefully where and how to handle it in the end." He added, "Until now, we have only added Toheo zones and never canceled them. (Mayor Oh’s statement) means that external environmental factors have changed significantly, so it is time to review it again, but no position has been finalized on the details." This means that the city is internally reviewing the cancellation of Toheo zones, but nothing concrete has been decided yet.
The day before, Mayor Oh Se-hoon said at the "Big Debate on Easing Regulations to Revive Livelihoods," "The Toheo zone system, which was chosen during a special period, is being actively considered for cancellation," and added, "We will organize our thoughts and announce them soon."
Mayor Oh judged that conditions have been created to consider lifting the Toheo zones as the Seoul real estate market stabilizes. He said, "Experts believe that real estate prices, which surged last year, have entered a downward stabilization trend over the past two to three months. Recently, the number of transactions has decreased by about 30% monthly on average," adding, "We are cautious about the possibility of an excessive downward trend in real estate and are actively reviewing (the cancellation of Toheo zones)."
The city is expected to proceed with the cancellation within the first half of this year. However, it is anticipated that minimum measures to prevent house price increases due to localized development will be maintained. The city explained, "As a result of research projects to explore operational directions for long-term designation of Toheo zones, it was concluded that there were short-term effects on transaction volume and price stabilization, but the effects became negligible over time."
The Toheo system was introduced to prevent speculative transactions and maintain a stable market order. When an area is designated as such, transactions of houses, commercial buildings, or land above a certain standard require permission from the mayor of the city, county, or district office.
Currently, 65.25㎢, equivalent to 10.8% of the total area of Seoul (605.24㎢), is designated as land transaction permission zones. The Toheo zones designated by the Seoul mayor include major reconstruction complexes (Apgujeong, Yeouido, Mokdong, Seongsu), the International Exchange Complex District and nearby areas (Jamsil-dong in Songpa-gu, Samsung, Cheongdam, and Daechi-dong areas in Gangnam-gu), natural green areas in Gangnam and Seocho, 16 public redevelopment candidate sites, 12 New Town Planning sites, rapid integration zone candidates, and selected sites, totaling 64.5㎢. The Yongsan-gu area was also designated as a Toheo zone by the Minister of Land, Infrastructure and Transport.
Experts Say "Cancellation of Toheo Zones Needed"
At a recent debate hosted by Seoul City, Professor Lee Chang-moo of Hanyang University said, "It is difficult to be certain whether the designation was really necessary," diagnosing that "reasonable criteria have become necessary over time." In particular, he said, "There are doubts about the rationality of designation for the International Exchange Business District," and added, "I believe that whether or not the Toheo zones are lifted has not significantly affected the overall market prices in Seoul."
Experts evaluated that transaction volume may increase in the short term after the cancellation of Toheo zones, and investment demand in reconstruction complexes may also rise. Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, explained, "The effectiveness of the system has not been proven, and the real estate prices in regulated areas have increased more, so cancellation is the right direction. In the short term, transaction volume may increase and prices may rise. Jamsil was less affected due to many actual residents, but interest is likely to increase in Cheongdam and Daechi areas where price control was more significant. With the removal of the actual residence obligation in reconstruction complexes, interest in investment may also increase."
An expert who requested anonymity said, "It should not have been designated in the first place. The real estate market atmosphere in 2023 was worse than now, and cancellation should have been done then. Especially in commercial areas, the land transaction zones had little effect," adding, "Compared to 2016 statistics, the proportion of outside investors in Gangnam-gu decreased in 2023 statistics, but the cancellation of Toheo zones will allow freer exercise of property rights and may increase the inflow of outside investors."
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