An analysis of South Korea's real estate market following President Yoon Suk-yeol's impeachment. We explore the potential effects on policy momentum, regulatory tightening, and prolonged market uncertainty.
Yoon Suk-yeol's Impeachment and Changes in the Real Estate Market
On December 14, 2024, South Korea’s National Assembly passed an impeachment motion against President Yoon Suk-yeol, intensifying interest in its potential effects on the real estate market. The ongoing political turmoil, combined with tightened lending regulations, raises concerns about further market stagnation.
Loss of Momentum for Major Real Estate Policies
Stalled Efforts to Repeal the Two Rental Laws
The government’s initiative to repeal the Two Rental Laws (contract renewal request right and rent cap) faces significant obstacles. Opposition party resistance and political uncertainty are likely to hinder legislative progress.
Reconstruction Excess Profit Recovery and Official Property Valuation Policies
Efforts to abolish the reconstruction excess profit recovery system and reduce official property valuations are also expected to lose momentum. These policies aimed to ease burdens on property owners and revitalized markets, but current circumstances make their implementation challenging.
Greenbelt Deregulation and Supply Initiatives
The government’s plans to ease greenbelt restrictions and promote first-generation new town redevelopment are also likely to be delayed. However, the special law for new town redevelopment, already passed with bipartisan support, may proceed as planned.
Impact on GTX and Regional Transportation Policies
The Greater Seoul Metropolitan Express Train (GTX) project is expected to remain unaffected by political instability. Construction on the B and C lines is underway, though additional lines may face delays due to funding and administrative hurdles.
Lending Regulations and Political Uncertainty
Since mid-2024, stricter lending regulations have already driven down real estate prices. Political uncertainty could deepen market stagnation and reduce transaction volumes further.
Recent Market Trends
Nationwide Apartment Sale Prices: Declined for four consecutive weeks (-0.03%, larger than the previous week’s drop).
Housing Business Sentiment Index: Continuously falling.
Experts suggest prolonged stagnation, with shrinking transactions and increased price declines in certain regions.
Opposition Policies and New Directions
The opposition Democratic Party of Korea (DPK) has consistently criticized President Yoon’s real estate policies as favoring wealthy property owners. Should the opposition gain power in the next election, more public-oriented policies like land ownership tax and basic housing supply may come to the forefront.
Key Policies Proposed by Lee Jae-myung
Land Ownership Tax: Comprehensive taxation on landowners, aiming to raise the effective property tax rate above 1%.
Supply of 2.5 Million Public Housing Units: A large-scale plan to stabilize housing for low- and middle-income households.
Basic Income Funding: Using land ownership tax revenue to support a universal basic income program.
Market Uncertainty Post-Impeachment
Regional Market Trends
In Greater Seoul, including the Gangnam district, apartment transactions have dropped by 15% month-on-month. Similar stagnation is evident in satellite cities like Dongtan and Pyeongtaek.
Reduced Transactions and Price Declines
Transaction volumes continue to plummet in key regions, with peripheral areas seeing price declines of up to 2% in recent weeks.
Psychological Impact of Political Instability
Shifts in Buyer and Seller Sentiment
Political uncertainty has deepened the wait-and-see attitude among both buyers and sellers. Many prospective homebuyers, particularly end-users, are delaying purchases in anticipation of further price declines.
Weakening Investment Sentiment
Investors are also hesitant, fearing drastic policy changes. This sentiment has spilled over into the commercial real estate sector, where vacancy rates are rising.
Effects of Lending Regulations on the Real Estate Market
Key Impacts of Lending Regulations
Enhanced lending restrictions since early 2024 have reduced mortgage limits and raised interest rates, significantly dampening purchasing power and sentiment.
Buyer and Seller Dynamics
Buyers expect further price declines, while sellers are reluctant to list properties in a declining market, leading to stagnation in transactions.
Expert Opinions
Yoon Soo-min, a real estate specialist at NH Nonghyup Bank, remarked, “With the impeachment, most of the government’s real estate initiatives have lost momentum. If the current lending regulations persist, market stagnation will likely extend.”
Kwon Dae-jung, a professor at Sogang University’s Real Estate Department, added, “While the market may not experience dramatic short-term changes, long-term transaction declines and regional price drops appear inevitable.”
Conclusion: Ongoing Uncertainty in the Real Estate Market
The impeachment of President Yoon Suk-yeol has intensified uncertainty in South Korea’s real estate market. Lending regulations and political instability are expected to prolong stagnation, though infrastructure projects like GTX and new town redevelopment may proceed relatively unaffected. Close monitoring of market dynamics will be essential in the coming months.
.png)