[Lee Jae-myung Administration Year 1] Only Tightening Demand and Loans... Housing Prices Remain Uncertain

Real Estate Policies

Stalled Supply, Intensifying Housing Crisis

Housing Price Surge in the First Year

Largest Increase Since the Participatory Government Era

The real estate report card for President Lee Jae-myung’s first year in office is, at present, difficult to rate positively. Since the 2000s, the increase in housing prices during the first year of each administration has been the highest since the participatory government era. Even considering that housing prices are not determined solely by government policies and that some effects from previous administrations’ missteps are inevitably reflected, the fact that the fluctuation in housing prices—a key indicator for gauging the administration’s first-year performance—has been so significant is enough to warrant criticism. Recently, the housing crisis has intensified, with sharp increases in both rent and deposit-based lease prices, especially in Seoul and parts of the greater metropolitan area.

President Lee’s position on real estate is clear. He has repeatedly stated since his inauguration that he intends to overhaul the conditions that enable unearned income from real estate and to eradicate what he calls “nationally destructive” real estate speculation. It was in this context that the new administration, which was launched without a presidential transition committee, announced its first real estate measure—household debt management—less than a month after taking office.

President Lee Jae-myung is speaking at the Cabinet meeting and emergency economic inspection meeting held at the Blue House on the 26th. Photo by Cheongwadae Press Corps, Yonhap News

Under the June 27 measures last year, home mortgage loans for multiple home owners were completely banned and the maximum loan limit was capped at 600 million won. The government blocked lease loans with conditional transfers of ownership, which were often used for gap investments, while also tightening the loan-to-value (LTV) ratio for first-time buyers and limiting unsecured loans to within annual income. These stringent measures were introduced as signs emerged that housing prices could spike following the Democratic Party’s return to power, particularly after land transaction permit zones were lifted and then re-designated in the Gangnam 3 Districts and Yongsan District of Seoul.

About two months later, the government announced a large-scale housing supply plan. The September 7 initiative proposed supplying a total of 1.35 million housing units in the metropolitan area by 2030. Due to the slow pace of housing supply during the Yoon Suk Yeol administration, concerns had been spreading since the beginning of the year—particularly in the Seoul real estate market—that the number of completed and move-in ready properties would fall sharply compared to previous years. However, the actual supply of desirable housing, such as apartments, fell short of expectations. The plan was criticized for being similar to those under the Moon Jae-in administration and for merely fueling further price increases.

Even after unveiling strict household debt measures and supply plans, the upward trend in housing prices in Seoul did not subside, prompting the government to further strengthen demand-suppression policies. Twelve areas—including all of Seoul and adjacent locales like Gwacheon and Gwangmyeong—were designated as adjustment zones, speculative overheating zones, and land transaction permit zones (applicable only to apartments). While maintaining the maximum mortgage limit at 600 million won, the loan cap was further lowered to 200 million won for homes priced over 2.5 billion won and to 400 million won for homes priced between 1.5 and 2.5 billion won.

The urban housing supply and acceleration plan announced on January 29 this year was a response to criticism that the September 7 measures were lacking in specifics. It aimed to designate concrete sites in Seoul and surrounding areas and accelerate supply. The plan included detailed supply volumes and timelines for areas such as the Yongsan International Business District, the relocation of Gwacheon Racecourse and military bases, and Taereung Country Club. However, as the plan was announced without sufficient consultation with stakeholders such as local governments and residents, questions remain about its feasibility.

President Lee also took the lead in reinstating the capital gains tax surcharge on multiple home owners, a policy that had been suspended annually under the Yoon Suk Yeol administration but reintroduced after four years. He made it clear himself that “there will be no further extensions.” Going forward, the real estate policy will be evaluated based on several key variables: how the upcoming tax reform bill will handle real estate taxation, the pace at which the widely anticipated benchmark interest rate hikes will proceed, and whether legislative tasks related to housing supply will be handled smoothly.

An expert who requested anonymity stated, “When you look at the process of reinstating the capital gains tax surcharge on multiple home owners or introducing supplementary measures to encourage property listings in land transaction permit zones, it is clear that the president has essentially set policy direction, with orders being handed down in a top-down manner. This ultimately results in a rigid and risky decision-making structure.” Another expert commented, “Policies that force real residence have inevitably stimulated the rental market, and both transaction and rental indicators are worrisome for the second half of the year and beyond.”

This content was produced with the assistance of AI translation services.