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| An aerial view of an apartment complex in Jamsil, Seoul, on July 14 / Yonhap |
By Nam Hyun-woo
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| Lee Moon-ki, chief of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, speaks during a press conference at the ministry in Sejong, Monday. Yonhap |
The new measure came as housing prices in Seoul have been showing signs of a rebound in recent weeks even though the government introduced a set of regulations last September to stifle rises in housing prices, including increasing tax burdens on multiple homeowners.
Market analysts expect the new measure will lower housing prices in Seoul by 1.1 percentage points annually. But they also said the price ceiling will discourage construction firms from building new housing.
The Ministry of Land, Infrastructure and Transport said it will revise the Enforcement Decree of the Housing Act by October so it can ease the conditions of the cap on prices of new private apartments.
The price cap plan for new private apartments was introduced in September 2007, but lost its effect in April 2015 as the previous government placed tough conditions on homes subject to the regulation.
Currently, the price cap regulation pertains to new apartments in regions where the housing price growth rate of the previous three months is more than double the inflation rate. As the country's inflation rate remains below 1 percent, however, the regulation has not been in effect.
In the revision, the ministry said it will change the condition to new apartments in regions "designated as overheating speculation zones."
This will encompass the entirety of Seoul, Sejong, a number of satellite cities in Gyeonggi Province and a district in Daegu.
If the revision goes as planned, the new apartment selling prices in those regions will be limited to below the sum of the housing site price and construction costs.
"The government will decide on a detailed timeframe and subjected regions after the revision in October," Lee Moon-ki, the ministry's housing and land office chief, said in a press conference. "The government believes the presale price of new homes will stay at 70 percent to 80 percent of the current level after the measure."
The Korea Research Institute for Human Settlements, a state-run institution for housing policy, expected the new measure will bring down the annual home selling price in Seoul by 1.1 percentage points.
"The expansion of the presale price cap system will work as a factor stabilizing the housing market," the institute said in a recent report. "In particular, this will ease excessive demand for redeveloped apartments whose prices are set high."
However, concerns remain that the price cap will weaken supply of new housing, as well as slow down the construction industry, because when the price cap plan was first introduced in 2007, it was followed by a decline in the number of new homes.
According to Real Estate 114, a market tracker, 229,000 new homes were supplied in 2007, but the number declined quickly to 145,000 in 2008, 126,000 in 2009 and 91,000 in 2010.
"The price cap system affected new housing all across the country in 2007, but this time it will affect selected regions, and other measures to pump up supplies are ready," Lee said. "The government believes there will be no squeezing in the new housing supply."
