Gov’t sets price ceil­ing on pri­vately built apart­ments

The Korea Times - - NATIONAL - By Kwak Yeon-soo [email protected]­re­atimes.co.kr

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 in four dis­tricts south of the river and five ar­eas in four dis­tricts north of the river are sub­ject to the price cap sys­tem, the land min­istry said.

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 the 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.”

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 the cap­i­tal.

“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 could 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.

Yon­hap

Land Minister Kim Hyun-mee speaks at a hous­ing pol­icy re­view com­mit­tee meet­ing held at the Gov­ern­ment Com­plex in Se­jong, Wednesday.

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