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Real estate regulations strengthen 'balloon effect'
관리자 2022-07-04 오후 2:00:52 8242

        Real estate regulations strengthen 'balloon effect'




The government's stronger real estate regulations are expanding the "balloon effect" across the country by increasing apartment prices in some regulation-free areas northeast of Seoul, according to real estate experts. The Ministry of Economy and Finance introduced the latest regulatory measures on Wednesday, with a view to stabilizing steeply soaring housing prices not just in Seoul, but in satellite cities in Gyeonggi Province. The so-called June 17 real estate regulation focused on driving down the loan-to-value ratio in more satellite cities in Gyeonggi from 60 percent to 50 percent on apartments valued at less than 900 million won.

But the introduction of the regulation is having an adverse effect on the market, raising apartment prices in a few regulation-free areas such as Gimpo and Paju. The two areas have been relatively free from speculation for years, with most housing prices there remaining stagnant or rising by a slight margin. But some apartments in the areas jumped by tens of millions of won within a day of the regulation's implementation. It remains to be seen whether the regulation will continue to have a negative effect in terms of stabilizing the market, but it appears likely the balloon effect will remain in place in the short run.

"As it has been only a few days since the measure was introduced, sellers are in wait-and-see mode on hopes for a further rise in the value of their apartments," an official of a real estate agency in Paju said. Experts voiced concerns that such a "reckless" introduction of regulations would only continue adding confusion to the market. "The step to restrain the demand won't work in the long run, and such a measure will only generate short-term effects," said Kwon Dae-jung, a real estate professor at Myongji University.

The balloon effect will continue to last and apartment prices in these areas are expected to jump further in the near future, according to him. Kwon also expressed that the balloon effect will likely expand into other regulation-free areas at a time when there is enough market liquidity amid low interest rates. Hong Joon-pyo, ex-chairman of the former main opposition Liberty Korea Party, denounced the Moon Jae-in administration for introducing the intensive real estate regulations. "The government appears to mistake the nation for North Korea," Hong said. "It will be tough for the nation to achieve economic recovery given the administration's 22 rounds of real estate regulations, even if opposition parties are presenting bills on real estate deregulation."

Minor opposition Justice Party leader Sim Sang-jung also urged the government to reform the fundamentals of the administration's real estate policies. "The 22nd real estate policy has once again expanded regulated areas, but concerns are the steps fail to seize speculative forces, and instead, block dreams from members of the public who seek to purchase housing," she said.



Vocabulary:
1.Balloon effect = refers to the way a balloon behaves -- expanding elsewhere wherever you squeeze it. Gap investment involves purchasing houses with “jeonse” tenants, who rent houses by paying only a lump-sum deposit. The money is returned when the related contract expires.
2.Adverse effect = having a negative or harmful effect on something
3.Market liquidity = refers to the extent to which a market, such as a country's stock market or a city's real estate market, allows assets to be bought and sold at stable, transparent prices.

Questions:
1.What are the experts' concern that would add confusion to the market?
2.Why won't he measure won\t work in the long run?
3.Which administration introduced the intensive real estate regulations? How would it affect the economic recovery?
4.What happens if the real estate market crashes?

5.In what way does the balloon effect strengthen the real estate in your country?  
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