Seoul mayor faces bumpy road ahead to stabilize housing market

New Seoul Mayor Oh Se-hoon, whose main pledge was to stabilize the city’s housing market, faces a difficult task of winning support from a ruling party-led government and lawmakers, on top of having to curb soaring property prices that have risen in anticipation of promised policy easing.

Oh’s real estate policy focuses on revitalizing private-led development and urban redevelopment with various deregulation policies. Through this, he aims to provide 360,000 housing units in five years.

As with all ambitious plans, most real estate policies cannot be done by the city government alone and needs strong support from the city council, lawmakers and the central government, which is currently either dominated or led by the ruling Democratic Party of Korea.

Out of the 109 member-strong Seoul Metropolitan Council, 101 are from the ruling party, and 174 out of 300 seats of the National Assembly are held by the Democratic Party.

In order to height restrictions of apartment buildings, which Oh promised, the city government requires consent from the city council. The deregulation on redevelopment of aging buildings needs cooperation from the Land Ministry and the central government.

However, the central government has showed no intention of changing its state-led housing development policy.

A day after the by-election on Thursday, Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki said during a ministerial meeting, “The big framework of existing real estate policies, such as controlling speculative demand, protecting real-time uses and eradicating unfair transaction, should be maintained without shaking.”

Oh is also planning to seek cooperation with the central government over the reinvestigation of the increased assessed value of apartments.

“Although the city government does not have the authority to adjust the increased assessed value, I would like to believe that it is possible to negotiate with the central government so that the price does not rise at a rapid pace,” he told reporters on Saturday.

But housing prices have already been heating up in the run-up to the election on Oh’s promises of deregulation.

One of the main reasons young people in their 20s gave their votes to the conservative party during the recent by-election was because the current administration had failed to cool down the red-hot property market.

Over the past few days, the prices of old apartment complexes in Songpa-gu, Gangnam-gu, Seocho-gu and Gangdong-gu, began to soar in anticipation of potential redevelopment.

The price of a 245-square-meter apartment unit in Apgujeong-dong, Gangnam-gu, jumped to 8 billion won ($7.1 million) last week from 6.7 billion won in October last year, according to the Land Ministry.

Korea Real Estate Board data on weekly apartment price trends on Sunday showed that housing prices in Seoul rose 0.05 percent as of the first week of April, the same rate as last week, in the wake of expectations of deregulations following the by-election.

Experts predict that housing prices will continue to rise for the time being, particularly in old apartment complexes in Gangnam facing redevelopment.

Kwon Dae-jung, a real estate professor at Myongji University, said, “Housing prices for redeveloped complexes are expected to remain strong as expectations for redevelopment are rising. In order to stabilize the housing market and pursue housing policies he pledged, Oh should promote the policies in cooperation with the government.”

By Shin Ji-hye (shinjh@heraldcorp.com)