South Korea’s government on Tuesday adopted a disputed presale price cap system on privately built apartments, extending its efforts to stabilize the bubble-prone real estate market here.
With the forthcoming price regulation expected to take effect as early as this month, local builders are hastening to sell their newly built apartments.
The Cabinet, chaired by Deputy Prime Minister and Finance Minister Hong Nam-ki, passed five legislative bills and 24 presidential decrees, including the enforcement ordinance of the Housing Act, according to the Ministry of Economy and Finance.
“The government will make thorough preparations with related departments to finalize the affected regions and timeline of the presale price cap system (for privately built apartments),” the fiscal chief said.
Deputy Prime Minister and Finance Minister Hong Nam-ki chairs a Cabinet meeting on Tuesday morning at Seoul Government Complex. (Ministry of Economy and Finance)
Under the new regulation, the government may designate “speculation prone areas” among administrative districts which have seen their average housing price soar more than double the overall inflation rate over the past three months.
Under such a standard, all 25 districts of Seoul may be subject to the price ceiling, along with Gyeonggi Province’s Gwacheon and Gwangmyeong, Seongnam City’s Bundang-gu, Daegu’s Suseong-gu and the administrative city of Sejong.
Once the revised ordinance takes effect, a housing policy committee will kick off its review of housing prices and confirm the regions that will be subject to the regulation, according to the Ministry of Land, Infrastructure and Transport.
But old apartment complexes that have already obtained reconstruction consent will be exempt from the price regulation, on condition that they are put on the market within six months after the new ordinance is implemented.
In July this year, Land Minister Kim Hyun-mee had suggested a price ceiling -- which previously was enforced on government-built apartments only – to be expanded to privately built apartments.
Meanwhile, builders here have been shifting ahead their apartment sale timeline, boosting the presale volume.
According to real estate information provider Real Today, about 86,373 units newly built apartments are expected to be put on the market in the fourth quarter. This is more than double the figure observed in the same period last year.
The Housing Sales Survey Index, which reflects the market sentiment of builders, stood at 78.6 in October, up both from a year earlier and from a month earlier.
“But the latest index change does not necessarily indicate a general recovery trend in the real estate market,” said an official.
“For now, it is more likely just a temporary reflex effect of the (upcoming) price cap system.”
By Bae Hyun-jung (firstname.lastname@example.org)