Government's Housing Price Control Causes Gangnam Slump, No-Do-Gang Surge

As the government's regulations, such as heavy capital gains tax on multiple homeowners, continued, most multiple homeowners exited the market after 2020. Currently, the housing market is driven by real-demand buyers concerned about rising housing prices, not by multiple homeowners. This indicates that investment sentiment in the market has contracted and been reorganized around actual demand.

The Deputy Prime Minister candidate indicated that the government might purchase auctioned properties if the housing market crashes. This can be interpreted as the government's intention to directly intervene to stabilize the market's drastic downward volatility. At the same time, it could also be perceived by market participants as a warning about price declines.

This appears to be an attempt to increase the efficiency of public housing supply. However, concerns are also raised about the pace of existing projects, such as the 3rd new towns, due to this organizational restructuring.

These individuals will temporarily become non-homeowners, further exacerbating price pressure in the Jeonse and monthly rent markets. The current Jeonse and monthly rent market is already severe, but the relocation demand is expected to have a much greater ripple effect. The government may be tempted to control the speed of redevelopment and reconstruction to stabilize the Jeonse and monthly rent markets.

Currently, 22 out of 25 districts in Seoul have entered the scope of the comprehensive real estate tax. Consequently, criticism is mounting that the comprehensive real estate tax, originally intended as a wealth tax, may devolve into a 'Seoul tax'.

Such policies could reduce the supply in the Jeonse and monthly rent markets and further exacerbate the supply shortage. This poses a risk to the long-term stability of the housing market.

Those subject to the comprehensive real estate tax find it difficult to predict how much they will pay next year, and sellers also struggle to estimate their tax burden. Due to this uncertainty, market participants are likely to maintain a wait-and-see attitude, postponing buying and selling until the National Assembly passes the bill in December.

While the three Gangnam districts are observing the government's tax reform with decreased transaction volumes, relatively lower-priced areas like Nowon and Dobong continue to rise due to less burden from the comprehensive real estate tax. This indicates that government regulations are causing a balloon effect, shifting demand from certain areas to others.

When a new regulated area is designated, two phenomena occur in the market. First, a balloon effect arises as investment and real demand shift to nearby unregulated areas. Second, within existing regulated areas, demand re-concentrates in highly preferred complexes like Bundang or areas that were originally regulated. This suggests that regulatory policies may lead to demand shifts between specific areas rather than overall market stabilization.

In the past, 700 million won could buy a house, but now it's only enough to secure a Jeonse. In particular, Jeonse listings under 400 million won have drastically decreased, causing severe housing difficulties for newlyweds and others. The shortage of Jeonse listings itself is also intensifying the Jeonse crisis.

The effectiveness of this policy is expected to largely depend on the scale of tax benefits provided.

The Ministry of Land, Infrastructure and Transport stated that there was no consideration of such a fee and that it lacked legal basis. Given strong public opposition to a site visit fee in Korea, its implementation is considered unlikely.