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Seoul's Price Cap 1 Year Later — Looking Back

1 year ago, the government has placed a presale price cap on privately built apartments in Seoul to curb housing prices. According to Land Minister 'Land Minister Kim Hyun-mee' said during a house review committee meeting held at Government Complex in Sejong, "Lower interest rates and ample liquidity in the market amid economic slowdown have increased demand for new homes in Seoul."

"As a result, presale prices of newly built apartments jumped four times higher than those of existing homes."

He stated that "the price cap regulation pertains to new apartments where the housing price growth rate of the previous three months is more than double the inflation rate or the average housing competition exceeds 5 to 1 in the previous two months"

Kwon Dae Jun a professor at Myongji University criticized the new policy stating that The price cap regulation can stifle rises in housing prices in the short term, but it won't necessarily lead to recovery in the real estate market in the long term,"

"Prices alone cannot stabilize the real estate market. Lack of supply and excessive demand have caused the uptrend in Seoul's housing prices"

In addition to the price cap, policy makers have imitated a series of measures, including tightened home-backed loan regulations and hefty taxation to cool down housing prices.

Now we are left with the consequences of such a policy. The cost of housing has plateaued in recent months. Now, whether that is the consequence of the COVID-19 pandemic or the result of the governments' policies is up for much debate but experts are still skeptical of the program. Now with the pandemic at hand, although the government may be handling other measures, we will truly see the consequences and ramifications of a price cap in the next century.


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