South Korea Eases Real Estate Regulations in Seoul as Home Prices Tumble

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South Korea’s Finance Ministry said Tuesday that it would ease property regulations in the majority of districts in the capital Seoul in an effort to stabilize the nation’s weakening property market.

The ministry said that Seoul and its adjacent metropolitan areas would no longer be designated as “speculative districts” from Thursday, allowing home buyers to sell or purchase property with fewer restrictions.

Four districts—including Yongsan, Seocho, Gangnam, and Songpa—where stricter mortgage rules and heavier taxes are imposed on home buyers, will remain on the list, according to the ministry’s statement.

The move came as South Korean President Yoon Suk-yeol urged Tuesday to ease regulations on home buyers at a faster pace to ensure that home prices can “rise and fall predictably” while achieving a soft landing in the property market.

“With the recent hike in interest rates, there is a high risk of a hard landing, not a soft landing, so we must especially ease demand-side regulations in a bold and speedy manner,” Yoon said at a policy briefing, Yonhap News Agency reported.

Yoon said that the previous administration took an “ideology” approach to real estate issues, which resulted in a rise in housing prices, but that such an approach may distort the current market.

“If the government approaches this from an ideological perspective, the markets will become distorted, and if that happens, both the demand side and the supply side will be held back by regulations, and houses will not be properly supplied to the market while prices soar, followed by an increase in rent, thereby putting the people in a very tough spot,” he said.

The Bank of Korea has raised the policy rate by a total of 275 basis points since August 2021 to tame surging inflation.

Prices of apartments across South Korea fell for six consecutive months until November, the longest such stretch since late 2019, while home transactions dipped about 50 percent in annual terms in recent months, official data show.

The Korea Real Estate Board reported Wednesday that apartment prices decreased by 0.76 percent nationwide during the final week of December 2022 owing to rising lending costs and a slowing economy.

“As demand [for homes] sharply decreased, potential buyers remain hesitant in buying homes. More and more people expect home prices to fall further down the road,” the board was quoted as saying by Yonhap.

South Korea was one of six countries and territories—Hong Kong, Peru, China, New Zealand, and Morocco—where house prices fell in the third quarter last year, according to the Global House Price Index published by UK-based real estate company Knight Frank.

The report states that South Korea’s real housing price declined by 12.4 percent in the third quarter of last year, which is comparable to Peru.

Reuters contributed to this report.