[10.15 Measures] "We Will Redirect Real Estate Funds to the Real Economy"... Why the Government Took Decisive Action [Real Estate AtoZ]

Government: "Clear Signs of Market Instability... Preemptive Demand Management Needed"
Han River Belt Districts Including Seongdong and Mapo See Price Surge, Prompting Early Policy Response
Record-High Prices in 11 Seoul Districts, Bundang, and Gwac

The government's decision to announce additional real estate measures just over a month after the September 7 supply plan was driven by a combination of factors: the sharp rise and spread of housing prices in Seoul and the metropolitan area, overheating of prices centered on high-end homes, market disruption caused by irregular loans and gifts, and the time lag in the effects of supply measures. In particular, these policies aim to redirect funds concentrated in the real estate market into other sectors such as finance.

Apgujeong Hyundai Apartment. Photo by Hyunmin Kim kimhyun81@

On October 15, Minister of Land, Infrastructure and Transport Kim Yoonduk stated, "Concerns are growing over the inflow of capital into the housing market," adding, "Housing instability threatens the livelihoods of ordinary people and could undermine overall economic vitality, so it is necessary to respond preemptively." Minister Kim explained, "Clear signs of market instability are already being observed," and, "We responded early to avoid missing the golden window for policy intervention."

Recently, housing prices in Seoul have continued to surge, with the rate of increase accelerating for four consecutive weeks, particularly in key districts along the Han River. The government diagnosed that housing prices were showing signs of widespread escalation centered on the Han River Belt, and that preferred areas in Gyeonggi Province such as Bundang and Gwacheon were also exhibiting strong upward trends. In the case of Gwangjin District, a recent survey by the Korea Real Estate Board recorded the highest weekly increase (0.65%) since statistics began in 2012.

Kim Gyucheol, Director of Housing and Land Policy at the Ministry of Land, Infrastructure and Transport, said, "A supply-demand imbalance combined with expectations of interest rate cuts has led to a visible concentration of short-term demand," and added, "Given the time lag before the effects of the September 7 supply plan translate into actual supply for end-users, we determined that demand management is urgently needed." He further noted, "Speculative demand is once again moving, particularly in high-priced apartments in certain areas," and, "There are clear signs of market overheating."

In fact, all 11 districts in Seoul-Gangnam, Seocho, Songpa, Yongsan, Seongdong, Mapo, Gwangjin, Yangcheon, Gangdong, Yeongdeungpo, and Dongjak-have surpassed their previous peaks reached during the Moon Jae-in administration (2017-2022). Except for Yangcheon District, all of these areas are adjacent to the Han River. In Gyeonggi Province, Gwacheon and Bundang have also exceeded their previous highs set during the Moon administration. Among these, the cumulative price increase this year in Gangnam, Seocho, and Songpa (the three Gangnam districts), Seongdong District in Seoul, and Gwacheon City in Gyeonggi Province has already reached double digits.

The government also cited the disruption of the transaction market and heightened market instability caused by irregular gifts in high-priced housing areas as one of the reasons for these new measures. Im Gwanghyeon, Commissioner of the National Tax Service, stated, "If gifts are made at prices far below market value or if the so-called 'parental advantage' is used, we will thoroughly verify the parents' income sources," adding, "We will scrutinize all gift transactions in the four Gangnam districts and in Mapo, Yongsan, and Seongdong districts."

According to the Supreme Court's Registry Information Plaza, from January to September this year, the number of gifts of collective buildings (apartments, multi-family, row houses, and officetels) nationwide reached 26,428, a 4.1% increase from the same period last year (25,391 cases) and the highest in three years. In particular, the number of gifts in Seoul surged by 19.6% to 5,877 cases. The breakdown by district was Gangnam (507 cases), Yangcheon (396 cases), Songpa (395 cases), and Seocho (378 cases).

The aim of these new measures is to block excessive capital flows into the real estate market and to encourage funds to move into productive sectors such as finance and industry. This is in line with the President's consistent policy direction. Minister Kim explained, "The core of our policy is to create a structure in which speculative funds do not remain in real estate but move into the real economy."