Kwak Yeon-soo is a digital editor at The Korea Times creating, editing and curating digital content for the newspaper’s website, mobile app and social media. She previously covered a diverse array of cultural, political and business topics.
Gov't sets price ceiling on new apartments in affluent Seoul districts
By Kwak Yeon-soo
By Kwak Yeon-soo
The government has placed a presale price cap on privately built apartments in Seoul as part of its efforts to curb soaring housing prices, according to the Ministry of Land, Infrastructure and Transport Wednesday.
The price cap system will be applied to four affluent southern Seoul districts and four other districts in the city where apartment prices have been surging in recent months.
Twenty-two areas of four districts south of the river and five areas of four districts north of the river are subject to the price cap system, according to the land ministry.
The latest measure comes a month after the ministry revised the Enforcement Decree of the Housing Act to execute the presale price cap system for new apartments built on private sites amid signs of rising housing prices.
“Lower interest rates and ample liquidity in the market amid economic slowdown have increased demand for new homes in Seoul,” Land Minister Kim Hyun-mee said during a housing policy review committee meeting held at Government Complex in Sejong.
“As a result, presale prices of newly built apartments jumped four times higher than those of existing homes.”
Land Minister Kim Hyun-mee, right, speaks at a housing policy review committee meeting held at the Government Complex in Sejong, Wednesday. Yonhap
The land ministry explained that the price cap regulation pertains to new apartments where the housing price growth rate of the previous three months is more than double the inflation rate or the average housing competition exceeds 5 to 1 in the previous two months.
Whether or not the housing transactions increased by more than 20 percent from a year earlier is another relevant factor.
Despite the government's efforts to clamp down on apartment prices, market analysts expect the new measure will only have temporary effects on stabilizing housing prices in Seoul.
“The price cap regulation can stifle rises in housing prices in the short term, but it won't necessarily lead to recovery in the real estate market in the long term,” said Kwon Dae-jung, a professor at Myongji University.
“Prices alone cannot stabilize the real estate market. Lack of supply and excessive demand have caused the uptrend in Seoul's housing prices.”
Some also raised concerns that the price cap can weaken the supply of new housing.
The price cap plan for new private apartments was introduced in September 2007, but lost its effect in April 2015 as the government at the time placed tough conditions on homes subject to the regulation.
In recent years, policymakers have rolled out a series of measures, including tightened home-backed loan regulations and hefty taxation, to cool down housing prices.