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Surge in South Korea housing prices likely despite new policy measures

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An aerial view of an apartment complex in Jamsil, eastern Seoul. YONHAP NEWS AGENCY/THE KOREA HERALD

Surge in South Korea housing prices likely despite new policy measures

Housing prices are widely expected to soar despite the stringent regulations enforced by the South Korean government, market analysts said on Tuesday.

The government in a surprise move recently unveiled new measures to curb rising home prices, which push for tighter mortgage rules.

A report released by local brokerage Mirae Asset Daewoo warned local investors that if the new measures fail to rein in soaring housing prices, even stronger measures are likely to be adopted next year.

It recommended potential real estate investors to turn their eyes toward other related products including real estate investment trusts (REITs) or overseas real estate markets.

REITs, which are designed to give regular returns and steady profits to investors, have been gaining popularity in South Korea.

“The government is likely to announce more stringent measures if the market continues to be volatile,” Mirae Asset Daewoo senior analyst Lee Kwang-soo said in the report.

“In terms of asset management, it would be crucial to diversify one’s portfolio by investing in REITs and other global products with stable liquidity, compared with the local property market,” he said.

Lee noted the latest measures are “the strongest and most specific real estate measures announced by the Moon Jae-in administration yet”.

In a separate survey conducted by the Seoul Metropolitan Government, more than 60 per cent of citizens believe housing prices will soar next year, while some 10 per cent said it will fall.

The survey, involved 1,300 Seoul citizens over 19 years of age.

By details, 12.7 per cent of the respondents said that the home prices will “skyrocket”, while 48.4 per cent said that it will only increase slightly. Around 19.9 per cent said the price will remain flat while 8.2 per cent and 1.3 per cent said that the price will “slightly fall” or “plummet”, respectively.

Regarding the hike in property taxes on multiple homeowners, 71.7 per cent said they supported the measure. On the contrary, 26.2 per cent said they strongly disagreed or leaned toward disagreement.

Regarding the effectiveness of the previous real estate measure announced on September 13, 2018, only 27.6 per cent said it was an effective move, while over 60 per cent claimed it as useless.

Lawmakers were also divided on the latest real estate measures, with the minor opposition Bareunmirae Party’s Ha Tae-keung criticising the current administration for prompting a rise in housing prices through “nonsensical measures”.

Ha referred to the presidential Chief of Staff Noh Young-min’s instructions on Monday to ranking Presidential Blue House officials to dispose of their surplus real estate assets in the metropolitan area.

“The latest measures were released when housing prices have soared through nonsensical real estate measures, only fuelling public rage,” Ha said in a statement posted on Facebook.

He said Blue House officials selling their houses would only mean they will profit from the price rise.

THE KOREA HERALD/ASIA NEWS NETWORK

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