Yoon Ja-young is in charge of articles translated by a generative AI system and edited by The Korea Times. She is interested in improving the newspaper through AI.
Real estate bills to have limited impact on market
Members of the National Assembly vote to pass three key real estate reform bills to boost the property market, Monday. The bills, including steps to reinvigorate the reconstruction of apartments, are expected to have a limited impact on boosting the real estate market. / Yonhap
By Yoon Ja-young
By Yoon Ja-young
The passage of real estate reform bills at the National Assembly is expected to help revitalize the real estate market in some part of southern Seoul, but the effect is likely to be limited, according to market analysts.
The National Assembly passed a number of controversial real estate related bills, Monday, which the market has been demanding in order to boost it.
With the passage of the bills, the apartments built by private construction companies won’t be subject to the price cap set by the government.
Since the real estate market bubble in late 2000s, the government has been restricting construction companies from adding too much profit onto their construction costs.
It also delayed the taxation on the profits gained from reconstruction of old apartments. The decades old apartments in southern Seoul had been considered good investments as their prices soar when they are rebuilt into new apartments.
As they have become a target of real estate speculators, however, the government has adopted measures to collect surplus gains from the homeowners when they reconstruct old apartments into new ones.
With the extension of the real estate market slump, however, the government has been delaying its implementation. The passage of the bill delays implementation by another three years.
“The passage of the bills will help boost the reconstruction of old apartments in some areas,” said Kim Eun-jin, the head of research team at Real Estate 114, a real estate market information provider.
“The scrap of the price ceiling on new apartments will also apply to the reconstructed apartments. It means the old homeowners can expect better profitability (by selling the new homes at higher prices),” she said.
However, the analyst said that the benefit will be limited to the old but popular apartments in southern Seoul. “The demand on homes was limited to Gangnam and some newly developed cities this year. It will be similar next year.”
She said the market is going through differentiation among regions. “It is difficult to expect that the passage of the bills will affect the whole market,” she said, pointing out that the government’s previous real estate market boosting policies have had only short-term effect.
“The real estate market is determined by the macroeconomy in the end,” she said, adding that economic recovery is essential to boost the market.
Hyundai Securities also said in a report that the construction companies wouldn’t be able to raise prices of new apartments as much as they want due to sluggish market _ if they raise the price too much, the apartments won’t sell. “Unlike in the past when the real estate market was regarded as an investment, now the price is set by real demand. The construction companies will be able to raise prices in only certain regions,” it said.