By Jane Han
Staff Reporter
When President Lee Myung-bak inherited the country's fragile real estate market a year ago, which had just begun suffering a severe bursting bubble, he had two major challenges to tackle: getting transactions going again, but fending off further inflation.
It was a tough assignment, considering icy investor sentiment, unaffordable home prices and stiff regulations bogging down the market. Having more than 160,000 unsold homes piled up was also a burden. But the ``bulldozer'' President promised recovery, placing his bet on aggressive deregulation.
One year and six major real estate reform measures later, home values are slowly starting to rebound but aren't nearly stable, experts say.
``The lion's share of red tape has been removed, so the government is running out of cards to play. It's now the market's turn to respond,'' said Kim Eun-kyung, an analyst at Speed Bank, a Seoul-based property brokerage.
Lifting comprehensive property tax on expensive homes, transfer taxes and price caps on newly purchased apartments and regulations on reconstruction rules have been some of the most significant changes yet.
Many of Lee's policies were geared toward propping up the southern Seoul housing market, the epicenter of real estate speculation, but the outcome hasn't been rewarding.
According to Dr. Apartment, a real estate information and consultant agency, average home prices in the affluent Gangnam districts have fallen nearly 10 percent since the President took office in February 2008.
It said apartment prices in Songpa fell more than 10 percent, while those in Seocho and Gangnam shed more than 8 percent, much higher than the average price drop in metropolitan Seoul, which reached almost 3 percent.
``Deregulation hasn't had its full effect yet because global recessionary fear is holding back investment capital from flowing in the market,'' said Kim Tae-bum, an agent at Dr. Apartment.
Meanwhile, property prices in the traditionally weak northern Seoul areas stepped up by an average of over 10 percent, owing to government-led reconstruction and redevelopment projects targeted at narrowing the gap between the districts north and south of the river.
``Balance is good, but Gangnam is still the decisive factor that will prove whether the Lee administration's policies have been good or bad,'' said Kim, of Speed Bank.
The government's deregulatory measures and record low lending rates are opening up a good opportunity for homebuyers, but property brokers say the overall mood is still on hold.
``Expectations that more deregulation will get offered are working against the market now,'' says Lee Joo-hee, an agent covering Songpa.
The government is considering lifting anti-speculative measures imposed on three southern Seoul districts ― Gangnam, Seocho and Songpa ― but has currently put the plan on hold over concerns that the move may prompt speculation.
Other experts point out that Lee's real estate policies haven't been ``successful'' because of excessive expectations.
``Many of the deregulations that have been introduced so far have been previewed for months,'' said Kim. ``So by the time they actually get announced, the market does not respond the way it should, and homebuyers ask, `What's next?'''