Seoul, Oct 15 (IANS) The government on Wednesday designated all 21 remaining districts in Seoul as speculative zones while introducing tougher lending rules to rein in rapidly rising housing prices in the capital region, a move it said may also require tax revisions in the near future.

The decision came during a ministerial meeting held at the government complex in Seoul, attended by Finance Minister Koo Yun-cheol and Land Minister Kim Yun-duk, as well as key financial officials, reports Yonhap news agency.

The new speculative zone designations add to the existing four districts of Gangnam, Seocho, Songpa and Yongsan, effectively placing all 25 districts in Seoul under the speculative zone status.

Twelve cities in Gyeonggi Province, including Gwacheon, Yongin, Uiwang and Hanam, were also newly designated as regulatory zones.

The new designations will take effect Thursday. It marked the third set of housing market stabilization measures announced under the new administration since June.

Apartment prices in Seoul have been on a steep increase in recent months, especially in neighbourhoods around the Han River, fuelling speculative demand and accelerating upward price trends, emerging as a key policy test for the new government under President Lee Jae Myung.

“The golden time for stabilizing the housing market must not be missed,” the land minister said. “The government will mobilize all resources to place housing market stabilization at the top of our policy priorities.”

Financial regulations on mortgage loans will be tightened.

The government will apply a mortgage loan ceiling of 600 million won (US$420,688) for homes priced 1.5 billion won or less, 400 million won for homes valued at between 1.5 billion won and 2.5 billion won, and 200 million won for homes worth more than 2.5 billion won.

In addition, the government hinted at the possibility of raising real estate-related tax to “steer capital toward productive sectors.”

Specific revisions to housing tax rules will be determined after reviewing their impact on the market and tax equity, it said.

The proposal comes despite Lee having stressed during his campaign as candidate that his administration would refrain from relying on tax hikes as a primary tool for housing market stabilization.

During a parliamentary government audit on Tuesday, Koo said the president’s past comments of not using tax hikes to stabilize housing prices should be understood as an intent to use taxation only as a “last resort,” as opposed to ruling it out completely.

Authorities will also strengthen a crackdown on illegal housing transactions.

The government will set up a real estate crime oversight body under the prime minister’s office, which will directly conduct investigations through an affiliated investigative unit.

Separately, the land ministry plans to launch targeted investigations into false transaction price reporting, while the National Tax Service will closely monitor transactions involving luxury homes worth over 3 billion won.

In addition, the National Police Agency plans to launch a special crackdown on real estate crimes, focusing on price manipulation, illegal subscriptions and corruption tied to reconstruction and redevelopment projects.

Market watchers predicted the new measures will likely lead to a decline in transactions and slowdown in housing markets in Seoul’s outer districts and nearby areas in Gyeonggi Province in the near term.

“For now, the announced measures are expected to block the spread of housing price hikes, not only across Seoul but also in the southern capital region, leading to downward pressure on prices in those areas,” said Park Won-gap, a senior real estate analyst at KB Kookmin Bank.

—IANS

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