President Lee Orders Real Estate Market Stabilization Measures Amid Price Surge

South Korean President Lee Jae-myung has called for urgent government action to curb rising housing prices, expressing concern over the recent uptick in the real estate market. The president's directive, issued during a state council meeting, highlights a growing unease about market stability, particularly following the expiration of a grace period for capital gains tax on multiple property owners.

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The government's policies are important for trust. Are you preparing measures for the recent rise in housing prices?

The market has seen a noticeable decrease in available properties, especially in Seoul's affluent Gangnam, Seocho, and Songpa districts. In Seocho, for instance, apartment listings dropped by 16% in just over two weeks. This scarcity, coupled with sustained demand, has fueled price increases, prompting the president's intervention.

Industry insiders anticipate stricter government measures to be announced after June. Potential policies include increasing the effective burden of holding taxes by adjusting the fair market value ratio for comprehensive real estate tax and potentially reducing special deductions for long-term ownership. These moves aim to deter speculative investment and encourage the sale of existing properties.

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Reducing the special deduction for long-term ownership could be a strong signal to curb gap investments, reflecting the current administration's focus on owner-occupancy.

However, some experts caution that a purely regulatory approach could inadvertently signal a reduction in new housing supply, potentially exacerbating price and rent instability. While the government has announced plans to boost non-apartment housing supply, concerns remain about its effectiveness in stabilizing the broader rental market. The situation underscores a delicate balancing act between controlling speculation and ensuring adequate housing availability.

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However, along with regulations, it is necessary to consistently send signals for supply expansion to the market.