[Reporter’s Notebook] Real Estate Policy: Determination Alone Is Not Enough

Anxiety Spreads Amid Rising Seoul Home Prices
A Clear Roadmap Needed from the New Administration

On June 12, as news spread that the government would hold a real estate market monitoring task force (TF) meeting, anonymous messages titled "received text" began circulating in real time on online communities. These messages claimed that the government would discuss designating recently overheated areas such as Mapo in Seongdong-gu, Seoul, and Gwacheon as land transaction permit zones, and that a complete ban on loans for high-priced apartments would be on the agenda.

However, the materials released after the meeting contained none of these policies or any specific measures. Instead, they only reflected the authorities' "determination" to put all policy options on the table and review them, citing the unusual situation in the Seoul real estate market, the emergence of speculation and market-disrupting activities, and the spread of anxiety that could destabilize the market.

The embers ignited in February this year when Seoul Mayor Oh Sehoon lifted the land transaction permit zone designation have not been extinguished. Although the government re-designated broad areas including Yongsan-gu as permit zones about a month later, the remaining sparks seem to be spreading in all directions. This week, the increase in Seoul apartment prices reached its highest level in nine months. Household debt, which had been relatively stable, increased by 6 trillion won just last month.

The background behind the sharp rise in housing prices is complex. Some buyers are rushing to purchase before the implementation of the third phase of the debt service ratio (DSR) regulation, which will reduce loan limits next month. There are also groups with vague expectations that the pattern of rising home prices seen during the previous Democratic Party administration will continue under the Lee Jaemyung government. Concerns have also grown that chronic supply shortages will worsen, as key housing supply indicators such as permits and construction starts have plummeted over the past two to three years, especially as demand has become even more concentrated in preferred areas like Gangnam.

It is believed that President Lee, who has extensive administrative experience as both a mayor and a governor, as well as members of the ruling Democratic Party and academics who recently joined the presidential office, are well aware that real estate is a highly complex issue. There is likely a consensus that hastily announcing measures is unwise, especially since futile efforts to control the real estate market during the previous Moon Jaein and Roh Moohyun administrations only fueled voter resentment. Even the most well-intentioned policies can be misinterpreted by the market and fail to produce the intended results, which is another concern.

However, if any action is bound to draw criticism, doing nothing might seem the safest option, but that logic does not apply when the government is involved. The Constitution explicitly states that the government is obligated to implement policies, including housing supply, to ensure a pleasant residential environment. To reduce uncertainty, the new administration must clearly present its direction for real estate policy. Simply signaling "determination" to the market, as is currently the case, is not enough.