Seoul: The government on Wednesday announced that all 21 remaining districts in Seoul are now designated as speculative zones, as part of efforts to control the rapidly increasing housing prices in the capital region. This move may also lead to tax revisions in the near future.
According to Yonhap News Agency, the decision was made during a ministerial meeting at the government complex in Seoul, attended by Finance Minister Koo Yun-cheol and Land Minister Kim Yun-duk, along with key financial officials. The new designations add to the existing four districts of Gangnam, Seocho, Songpa, and Yongsan, making all 25 districts in Seoul speculative zones. Additionally, twelve cities in Gyeonggi Province, including Gwacheon, Yongin, Uiwang, and Hanam, were newly designated as regulatory zones.
The designations will take effect Thursday, marking the third set of housing market stabilization measures since the new administration took office in June. Apartment prices in Seoul have surged in recent months, particularly in neighborhoods around the Han River, posing a significant policy challenge for President Lee Jae Myung's administration. "The golden time for stabilizing the housing market must not be missed," stated the land minister, emphasizing the government's commitment to prioritizing housing market stabilization.
Financial regulations on mortgage loans will be tightened, with a mortgage loan ceiling set at 600 million won for homes priced at 1.5 billion won or less, 400 million won for homes valued between 1.5 billion won and 2.5 billion won, and 200 million won for homes worth more than 2.5 billion won. The government also hinted at potential real estate-related tax hikes to redirect capital toward productive sectors, although specific tax rule revisions will be determined after assessing their market impact and tax equity.
The proposal comes despite President Lee's campaign stance against relying on tax hikes for housing market stabilization. Finance Minister Koo clarified that the president's comments should be interpreted as taxation being a "last resort" rather than being completely off the table. Authorities plan to strengthen the crackdown on illegal housing transactions, with a new real estate crime oversight body under the prime minister's office to conduct investigations through an affiliated unit.
The land ministry will launch investigations into false transaction price reporting, while the National Tax Service will monitor luxury home transactions over 3 billion won. Additionally, the National Police Agency will crack down on real estate crimes, focusing on price manipulation, illegal subscriptions, and corruption related to reconstruction and redevelopment projects.
Market analysts predict that the new measures will likely lead to decreased transactions and a slowdown in housing markets in Seoul's outer districts and nearby Gyeonggi Province. Park Won-gap, a senior real estate analyst at KB Kookmin Bank, stated that the measures are expected to apply downward pressure on prices in these areas.
Budongsan R114, a housing market information provider, anticipates that the expanded speculative zone designations will affect approximately 2.3 million housing units, including 1.57 million units in Seoul and 742,000 units in Gyeonggi Province's designated areas. A real estate agent in Banpo, southern Seoul, noted that the measures would significantly tighten market liquidity, particularly impacting transactions for high-end homes.
However, some market observers caution that overly stringent measures could freeze transactions, ultimately benefiting only wealthy buyers with ample cash reserves and deepening market polarization.