[Insight & Opinion] Lifting and Reinstating the Land Permission System: Accountability Needed for Policy Confusion

The Land Permission System Reversal Triggers Market Overheating
Policy Failure Stems from Poor Forecasting and Political Misjudgment
A Thorough Investigation of the Policy Decision Process Is Needed

On February 12, the Seoul Metropolitan Government lifted the designation of land transaction permission zones for 291 apartment complexes in Songpa-gu and Gangnam-gu. However, just 36 days later, on March 24, it announced the implementation of the land transaction permission system (Land Permission System) for six months until September 30 across the entire Gangnam 3 districts and Yongsan-gu. Following media reports highlighting signs of overheating such as rapid price increases after the lifting of the restrictions, Mayor Oh Se-hoon, who had mentioned on March 10?only a month after the lifting?that “re-regulation is also under consideration,” moved to contain the situation by expanding the Land Permission System just nine days later.

It is only natural that the apartment market became volatile after the Seoul Metropolitan Government abruptly lifted the Land Permission System, which had been in place for the past five years, like a bolt from the blue, awakening residents in the affected areas who had been anxiously enduring the restrictions. Upon the announcement of the lifting, apartment transactions surged not only in the affected areas but throughout all 25 districts of Seoul, and prices rose sharply. The average monthly number of apartment transactions in Seoul, which was 3,404 from September last year to January this year over five months, increased to 5,506 in February. According to statistics from the Korea Real Estate Board, Seoul apartment prices have shown an upward trend for six consecutive weeks recently, with all 25 districts experiencing price increases.

In particular, from February 10 to March 10, apartment sale prices in the southeastern region, including the Gangnam 3 districts, rose by 1.67%, which is ten times higher than the average increase of 0.16% in the other four districts. In other words, after the lifting of the land transaction permission zone designation, apartment prices in Seoul rose overall, and a serious polarization appeared between the southeastern region, where the restrictions were lifted, and other areas.

Not only has this short-term overheating trend in the apartment market spread, but given the unstable period where the acting president’s acting official is leading the government due to the impeachment crisis, it is only natural that such overheating cannot be left unchecked. Although it is an embarrassing matter for the Seoul Metropolitan Government, the early decision to address the issue before it worsened is positively evaluated.

However, it cannot be overlooked that the policy decision process of the Seoul Metropolitan Government, which decided to lift the Land Permission System, and the Ministry of Construction and Transportation, which tacitly agreed to it, revealed serious problems.

First, since the transaction restrictions on the area with the strongest latent demand in Seoul were lifted after about five years, questions arise as to how the risks of overheating, such as price increases and transaction surges that were naturally expected, were overlooked in the decision to lift the restrictions. Second, since the lifting of the Land Permission System is a matter to which the public is highly sensitive, careful political consideration is necessary. Especially during the chaotic period caused by the impeachment crisis, the government needs to explain how such a policy could have been handled so carelessly.

Since the martial law situation, political protests have flooded the streets over the Constitutional Court’s ruling, and major accidents have occurred one after another. Amid this, the government is undermining the authority of its policies by abruptly lifting and re-imposing sensitive policies like the Land Permission System, which affect citizens’ property rights. If this is overlooked with just an apology, there is concern about how the government will persuade the public and demonstrate leadership in policy matters.

The recent decision to lift and then reinstate the Land Permission System is not merely an issue of curbing overheating in the Seoul apartment market. It is necessary to thoroughly investigate the policy decision process that caused this policy confusion, hold those responsible accountable, and use this as an opportunity for the government under Acting President Choe Sang-mok to strengthen the tension in national governance.

Kim Dong-won, Former Visiting Professor at Korea University