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The government has decided to develop around 30 regions in and around Seoul to provide over 300,000 homes by 2022 in a bid to put a lid on the upward spiral of housing prices.
At the same time, it has designated four more districts of Seoul _ Jongno-gu, Jung-gu, Dongdaemun-gu and Dongjak-gu _ as anti-speculation zones, subject to strict restrictions on housing speculation.
These are part of the government measures unveiled Monday to stabilize the overheating housing market in the capital region.
"The overheating of the housing market in Seoul seems to be due to multiple factors such as concern that housing supply will fall short of demand, an inflow of liquidity looking for investment tools, and the announcement of development plans," an official at the land ministry said.
Under the latest plan, the government plans to offer 300,000 quality homes at relatively low prices in the 30 new developments, which will have good transportation infrastructure.
The newly designated anti-speculation zones of Jongno-gu, Jung-gu, Dongdaemun-gu and Dongjak-gu will be subject to heavier mortgage restrictions. Currently, upscale southern districts such as Gangnam-gu, Seocho-gu and Songpa-gu as well as Yongsan-gu, Seongdong-gu and Mapo-gu are already designated.
It also designated Gwangmyeong and Hanam of Gyeonggi Province as overheated zones.
Currently, Bundang-gu of Seongnam City and Gwacheon, both in Gyeonggi Province, as well as Suseong-gu in Daegu and Sejong City are designated as overheated zones, subject to strong regulations on loan-to-value (LTV) and debt-to-income (DTI) ratios. They determine how much mortgage one can take out depending on the value of the housing or one's income.
The government's latest measures come as previous ones have failed to cool housing prices in particular in Seoul.
Apartment prices in Seoul rose 0.37 percent in the third week of August from the previous week, marking the steepest rise in 30 weeks according to Korea Appraisal Board.
The market had showed brief signs of stabilizing following the government's announcement of anti-speculation measures last August and the implementation of heavier capital gains tax in April, but the effects were short-lived.
Market analysts have been pointing out that restriction on demand has only prompted homeowners to expect a further rise in housing prices as the supply of new apartments in key areas of Seoul has fallen short of demand.
For instance, the government has been restricting the reconstruction of old apartments into new high-rise apartments, but it only made new apartments in upscale southern Seoul scarce.
Seoul Mayor Park Won-soon led the recent overheating of the Seoul housing market by announcing large-scale redevelopment plans, which led him to put the development plans on hold for the time being. He had unveiled comprehensive redevelopment plans for Yeouido and Yongsan as well as light rail train lines in Yangcheon-gu and Jungnang-gu, which made housing prices in the areas take a quantum jump.
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| Land Minister Kim Hyun-mee, right, speaks at an economy-related ministers' meeting held on Yeouido, Seoul, Monday. The government unveiled measures to stabilize housing prices in Seoul, including plans to increase the supply of new homes and further designate anti-speculation zones. / Yonhap |
Land Minister Kim Hyun-mee said the mayor's postponement of the development plans will help stabilize the housing market.
"Seoul needs the land ministry's approval to go ahead with the light rail projects. It takes a considerable amount of time until the plans turn into reality, so there shouldn't be too much expectation," she said at the National Assembly Monday.
Experts, however, doubt whether it will help stabilize the housing market.
"Without increasing supply in key areas of Seoul, the market will not stabilize. However, it can't be done in the short term," said Hong Chun-uk, investment strategy team chief of Kiwoom Securities.
