The recent surge in housing prices in Seoul has placed too much of a burden on the working class. Housing prices in Seoul have been on the rise, so the government announced the 8.2 real estate measures last year. At the time it was announced, it was likely that they would contribute to stabilizing housing prices by cracking down on the real estate market. However, some of these measures have led to the current situation, causing housing prices to rise further. Therefore, the government introduced the new real estate measures 8.27 and 9.13 in 2018. Let us find out what effect these policies will have and how we can work on this problem in the future.

The Current Status of Real Estate in Seoul

           As mentioned in the introduction, housing prices in Seoul are currently exploding. According to KB Housing, Figures show that apartment prices in Seoul are rising by 1.20 percent a week as of September 10th. Many people can think that the apartment prices trend is not serious. But, assuming that apartment prices in Seoul continue to rise by 1.20 percent a week for a year, the price of apartments will be 1.86 times higher after one year. There is also a blind spot in these statistics that does not reflect the actual upward trend. For example, if you look at 100 apartments which are 100 million won in price, we can safely calculate the average apartment price to be 100 million won. Let's consider the case in which one is traded for 200 million won in this situation. The actual price of the house is doubled, but if calculated by average, and the average doesn't change, the total price of 100 houses is just 10.1 billion won, meaning, the average house price fluctuates by only 1 percent. Although the figure is only one percent higher, the actual market is trading twice as much. Therefore, a rise in house prices can be thought of as a serious situation. This is especially true even though many regulations were already implemented last year.

Government Measures

8.2 Real Estate Policies in 2017

           The current government, which came to power in 2017, felt responsible for the soaring real estate prices in Seoul and tried to curb them. In addition, the rising housing prices naturally raised rents, adding to the burden on the working class. Accordingly, real estate measures were introduced on August 2, 2017 to adjust the total debt repayment rate and the mortgage rate needed for mortgage loans and new designation of overheated speculation zones. The reason for the designation of speculation zones and overheated speculation zones was that the real estate market needed different regulations depending on the region, as the degree of overheating varies from region to region. If designated as speculation zones, the transfer income tax [1]that arises at the time of transfer should be paid based on actual transaction price rather than on the basis of the disclosure, and the rate of the mortgage-to-income ratio and the total debt repayment rate will be limited to 40%. What is more, mortgage loans are limited to one per household. In other words, fewer mortgages can be taken out than in other areas, and people with multiple dwellings cannot get bank loans. Speculation hotspots are also subject to similar regulations, but they are moderate speculation zones in that multiple homeowners can get bank loans. Seoul City, Gwacheon City and Sejong City were designated as overheated speculation zones. Gangnam-gu, Seocho-gu and ten other areas were designated as speculation zones. This policy was considered very powerful at the time of its introduction, but the opposing parties regarded it as a short-sighted policy that contradicts market logic that only suppresses demand without supplying it.

8.27 Real Estate Policies in 2018

           The 8.27 real estate policy, announced in 2018, is a major step in designating additional speculative areas in about a year since the 8.2 real estate policy in 2017. After the 8.2 real estate measures, provinces had the effect of trading and falling house prices, but Seoul`s housing prices showed the highest growth rate ever. That is why the government suddenly came up with the measure. Four new zones were designated as speculation zones: Jongno-gu, Jung-gu, Dongdaemun-gu and Dongjak-gu. However, many people have questioned the effectiveness of the 8.2 real estate measures, which showed a trend toward higher housing prices, even though several districts in Seoul were previously designated as speculation zones. In fact, authorized brokers did not care about this and predicted that housing prices would rise. Recognizing this, the government also announced on September 13 that it would announce new real estate measures.

9.13 Real Estate Policies in 2018

           As housing prices in Seoul go down due to the previous real estate measures, the government is seeking new measures as housing prices have become more polarized between the metropolitan and non-capital areas. The policies so far have focused on strong capital gains taxes and mortgage restrictions. Even if the transfer income tax is set fairly strongly, the problem of housing prices will not be resolved. If multiple households do not buy a house, there is no tax to pay because it is tax that occurs only when the house is sold. In addition, mortgage loans only have to be imposed on the working class in speculative areas, giving them a reason to invest in other properties freely in high-income households, who had reduced their current capital and had large amounts of money. So, this time, the concepts of property tax and comprehensive real estate tax [2]were raised and the object was expanded.

Causes of Increase in Seoul Housing Prices

The Government's Mistaken Real Estate Policy

           The government, which took power in 2017, has used many policies to stabilize housing prices in Seoul. However, those policies did not reach the point and rather opened up a loophole for multiple residents. In the case of higher capital gains taxes, residents with multiple dwellings have not been burdened by the fact that they do not have to deal with housing. In addition, the designation of speculative areas and overheated speculation zones served as opportunities, not regulations, for multiple homeowners with existing liquidity. As a result, the government's policy failures caused housing prices to soar in Seoul. If the government recognizes that the real estate market is also a market and approaches it according to the basic market logic of supply and demand, it will be able to prevent such policy failures to some extent, and the opposite will be eliminated.

A Growing Sense of Anxiety

           The government's measures so far have mainly been aimed at forcing multiple homeowners to dispose of their homes, but they did not want to trade, and the risk of homelessness increased and caused prices to soar. Since people strongly want a house in Seoul not considering its designation as a speculation zone, the price of Seoul's housing ended up rising regardless of the policy's intentions. Moreover, in spite of the perception that prices in Seoul will rise regardless of an expanded policy, more people are flocking to Seoul. This vicious cycle has led to the current situation, and it seems necessary to decentralize demand and expand supply of innovative methods to solve it.

Solutions to the Housing Price in Seoul Increase

Balanced Regional Development

           Why are housing prices in Seoul continuing to increase, despite the fact that housing prices in the provinces have dropped significantly due to real estate measures and decreased trading volume? It is because the real estate market is, after all, run by the marketing principle that prices rise as people's demands continue despite various regulations in terms of taxes and transfers. In the old days, people were forced to live in Seoul because their job was in Seoul. For this reason, it could be solved by dividing several companies into provinces. In response, the government began moving public institutions from the previous administration to provincial cities. If it was realized, the original employees should move to the location where they work. Despite the cheap housing prices in the provinces, the public institutions that were moved to the provinces have become more of a work base for officials. That is because quality of life has become important. What is as important to people as making money at work is to enjoy their lives doing what they like. But because all the cultural facilities that allow people to enjoy such lives are concentrated in Seoul, people are not just trying to live in Seoul for their jobs, but for their own lives. Therefore, it would be a natural solution to create an attractive city equivalent to that of Seoul to prevent the odd form of population distribution in which half of the population currently live in the metropolitan area, and stabilize housing prices in Seoul.

The Government's Comprehensive and Consistent Measures

           In 2015, Finance Minister Choi Kyung-hwan's so-called "Choinomics" economic policy led to the rise in housing prices by easing regulations on real estate and lending and lowering interest rates. However, only two years later, when the administration changed, the policy reversed 180 degrees and began implementing strong regulations again. If the government tries to use the new policy every time it changes, no one will try to follow the incumbent administration's will. This is because people who have less confidence in the current government's policies will wait for 5 or 10 years until they can engage in related activities and replace those policies with some they favor. Therefore, it is necessary for the government to create a consistent real estate policy which is a bipartisan agreement and pursue it steadily. That would wipe out people's notion that each administration will be different from the one before and help stabilize housing prices as the government wants.

           Despite many strong regulations, housing prices in Seoul continue to rise. However, the government is focusing on the fragmented solution, not the fundamental solution. In order to prevent this phenomenon, balanced regional development is essential. Various facilities must also be supplied to local areas to change where people want to live. That way, the nation's real estate market can be a happy market for all, when it can be used efficiently to decentralize population.