Mapo, Seongdong, Gwacheon, Bundang Hit Hard... Apartments Under 1.5 Billion on Edge After President Lee's Remarks [Real Estate AtoZ]

President Lee Jaemyung Announces Plan to "Control Speculative Demand"
Expansion of Regulated Areas Likely, Decision Expected Around Chuseok
Seongdong and Mapo "Hangang Belt," Bundang and Gwacheon Also Strong Candidates
Concerns Over "Transa

At a press conference marking his first 100 days in office, President Lee Jaemyung stated, "We will control speculative demand in the real estate market." As a result, there is a growing possibility that popular areas such as the "Hangang Belt" in Seoul's Mapo-gu and Seongdong-gu, as well as Gwacheon and Bundang in Gyeonggi Province, will be designated as regulated zones (speculative overheated districts, adjustment target areas, and land transaction permit zones). Experts note that this was effectively foreshadowed in the September 7 policy measures and are closely watching for the possibility of additional regulations being announced around the Chuseok holiday.

Centras in Hawangsimni-dong, Seongdong-gu, Seoul. Gigi Auction.

According to Statistics Korea and the Korea Real Estate Board on September 13, the Seoul Consumer Price Index rose by 0.20% over the past three months (June to August). During the same period, the apartment price index in Seongdong-gu increased by 6.20%, which is 31 times the inflation rate, while Mapo-gu saw a 4.79% rise, or 23.9 times the inflation rate. Other districts such as Gangdong-gu (4.05%), Yangcheon-gu (3.94%), Gwangjin-gu (3.81%), Yeongdeungpo-gu (3.49%), and Dongjak-gu (3.22%) also recorded increases more than 15 times the inflation rate, with all 25 districts in Seoul surpassing this threshold. Gyeonggi Province also showed significantly higher price increases relative to inflation in key areas. The Consumer Price Index in Gyeonggi Province rose by 0.25% over the same period, while Bundang-gu in Seongnam City increased by 5.63% (22.5 times inflation), and Gwacheon City by 5.23% (20.9 times inflation).

The Ministry of Land, Infrastructure and Transport designates adjustment target areas and speculative overheated districts after comprehensively reviewing factors such as subscription competition rates, housing supply ratios, and potential market instability. An area can be designated as an adjustment target if the housing price increase rate exceeds 1.3 times the inflation rate over three months, and as a speculative overheated district if it exceeds 1.5 times. In the market, the prevailing view is that while all of Seoul meets the criteria, the actual designations will focus on the Hangang Belt, particularly Seongdong-gu and Mapo-gu. In Gyeonggi Province, Gwacheon and Bundang are being cited as strong candidates for regulation.

Through the September 7 measures, the government lowered the loan-to-value (LTV) ratio for regulated areas from 50% to 40%. However, this was limited to ultra-high-priced clusters such as the three Gangnam districts and Yongsan, so its effect was restricted. Lee Sangkyung, First Vice Minister of the Ministry of Land, Infrastructure and Transport, suggested the possibility of expanding this, stating, "Applying a 40% LTV to areas like Mapo and Seongdong would have a significant impact." The same policy also included a provision allowing the Minister of Land, Infrastructure and Transport to directly designate land transaction permit zones, which is being interpreted as a preemptive move to expand regulated areas.

The most significant impact of being designated as a regulated area will be on housing transactions priced at 1.5 billion won or less. The three Gangnam districts and Yongsan, which are already subject to "triple regulation" (speculative overheated district, adjustment target area, and land transaction permit zone), have a high proportion of ultra-high-priced homes, so the 600 million won mortgage loan cap introduced in the June 27 measures does not make much difference. However, the situation is different in Mapo and Seongdong, where more than half of this year's apartment transactions were for units priced at 1.5 billion won or less. This means there will be many cases where mortgage loans are capped at 600 million won. The proportion is even higher in other Hangang Belt areas, as well as Gwacheon and Bundang. These areas are likely to experience the same "transaction cliff" currently seen in the three Gangnam districts and Yongsan.

However, analysts believe that even if regulated areas are designated, it will not be enough to stabilize housing prices in the most sought-after regions of the Seoul metropolitan area. Despite the September 7 measures announcing the construction of 1.35 million new homes in the metropolitan area over the next five years, distrust in supply remains. There is also a possibility that the "balloon effect" seen during the Moon Jaein administration-where demand shifted to unregulated areas whenever regulations were imposed-could reoccur.

Yang Jiyeong, a senior specialist at Shinhan Premier Pathfinder, commented, "It appears that all of Seoul meets the criteria, but the actual designations are likely to focus on the Hangang Belt, especially Seongdong-gu and Mapo-gu, as well as Gwacheon and Bundang in Gyeonggi Province." She added, "In particular, Seongdong-gu has seen such a steep increase that it is now catching up with the three Gangnam districts, making regulation inevitable." She further predicted, "The President's remarks are a signal for stronger regulations, and it is highly likely that both speculative overheated districts and land transaction permit zones will be designated. A decision could be made around the Chuseok holiday."