Editorials
Loan curbs fuel the housing balloon effect
Mortgage restrictions aimed at pricey Seoul districts are driving apartment prices higher in outlying neighborhoods and nearby cities, underscoring calls for more supply-focused housing policy.
As President Lee Jae Myung announced plans to chair a national forum on July 23 to discuss the direction of housing policy, apartment complexes are seen across Seoul from Seoul Sky at Lotte World Tower in Jamsil, southern Seoul, on July 22.
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A newly built apartment in the Gireum-dong neighborhood of Seongbuk District, central Seoul, with the standard “national housing” floor plan of 84 square meters (904 square feet) recently sold for 2 billion won ($1.44 million). Even in what was once considered a relatively affordable area north of the Han River, apartments of this size have now entered the 2 billion won era.
The same unit had changed hands for 1.73 billion won in January, meaning its price climbed by nearly 300 million won in just six months. Similar trends are emerging in Cheolsan-dong in Gwangmyeong and Yeongtong District in Suwon, both in Gyeonggi, where prices for comparable apartments are approaching the same threshold.
The surge illustrates the growing “balloon effect” created by lending restrictions that were originally aimed at Seoul’s most expensive neighborhoods. Rather than cooling the housing market, the regulations have pushed demand into outlying districts and nearby cities in the capital region. As housing prices continue to rise, young people without inherited wealth are finding it increasingly difficult to buy homes.
The trend is also reflected in official statistics. According to June data from the Korea Real Estate Board, apartment price indexes in 19 of Seoul’s 25 districts reached record highs. As the government tightened mortgage rules for expensive homes, buyers shifted toward neighborhoods with larger numbers of apartments priced below 1.5 billion won, which still qualify for mortgages of up to 600 million won.
Short-sighted regulations have failed to curb housing prices and have merely redirected speculation from one area to another.
As the government has tightened access to financing, alternative arrangements have begun to spread. One example is seller financing, in which homeowners lend money directly to buyers.
Excessive regulations ultimately encourage loopholes and unconventional transactions.
The comprehensive real estate forum taking place Thursday should offer an opportunity to confront market realities. The government must first abandon the notion that taxes alone can control housing prices. Raising property taxes unilaterally would likely shift the burden onto tenants through higher rents while reducing the number of homes available for sale and suppressing transactions.
If property taxes need adjustment, transaction taxes should also be lowered to create a more rational tax structure.
Above all, expanding supply remains the essential task. Without revitalizing redevelopment and reconstruction projects, there is no practical way to increase the supply of housing in urban areas substantially. Excessive lending restrictions that undermine opportunities for ordinary homebuyers should also be revised to reflect market conditions.
No regulation can permanently overpower the market. Policies that rely on taxes and lending restrictions to suppress housing prices have repeatedly failed. Only measures that expand supply and support the normal functioning of the housing market can break the cycle of housing instability.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
