A Market Frozen by Real Estate Regulations, the Vanishing Ladder

Regulations have sharply cooled the real estate market. On October 15, the government designated all of Seoul and 12 areas in Gyeonggi as adjustment target areas and speculative overheating districts, and further expanded the same areas to include apartments and some row houses and multi-family homes within land transaction permit zones. The intention was to curb overheating, but the result was a sharp freeze in transactions and distorted market signals.

In the ten days after the measures took effect, apartment transactions in Seoul plunged by about 79% compared with the previous ten days. When transactions are restricted, prices may appear to have stopped on the surface. But the market loses the basis for judging “what the right price is.” A market stripped of that basis swings sharply even on minor news, and the cost of that volatility ultimately falls on end-users who actually need to buy homes.

The recent direction of real estate regulation is close to a “complete blockade on market entry.” As the expansion of the permit system, reductions in loan limits, and restrictions on home purchases in regulated areas tied to owner-occupancy requirements all operate at once, even normal demand is subjected to screening. As the thresholds of time and cost rise, more people wait on the sidelines, and the contraction in transactions deepens statistical distortions.

The problem is its regressive nature. The stronger the regulations, the more opportunities to buy a home are divided according to financial capacity. Young people and newly married couples who need leverage are pushed further away, while those with strong cash mobilization power are able to move. This uniform blockage works to the detriment of those who genuinely need housing.

The current real estate regulations kick away the ladder for end-users who need a home of their own. Frequent rule changes and lengthened reviews and approvals delay decisions and slow access to loans, sharply reducing the possibility of homeownership even for people with the same income.

The rental market is also affected. When home purchases are blocked, demand shifts into jeonse and monthly rent, and as regulatory uncertainty grows, rental supply contracts. If the burden on tenants increases, the legitimacy of the policy also begins to falter. If policymakers want to speak of “curbing overheating,” they must also present a path to stability in the rental market.

Policy should be guided by the principle of minimal intervention. Only those areas, property types, and sizes where speculative signals have been confirmed should be selected, the duration should be limited, and outcomes should be reviewed with data under a structure that ends the measures automatically. If the rules change frequently, no one can make long-term decisions.

Finance is an area where the market should judge and the parties involved should bear responsibility. Regardless of whether a buyer is a first-time homebuyer or currently without a home, the general principles of income and repayment capacity should be applied consistently, while guaranteeing freedom of choice and flexibility in switching loans and repayment methods. Even short-term profit-seeking transactions, rather than being subject to separate regulation, are better governed when profits and costs are determined in the market through accurate pricing of cost and risk; then the market finds balance without overheating.

Information increases predictability. People should be told from the outset when a rule begins and when it ends, and once the promised standards are met, it should stop automatically. Regulations should not be changed frequently, and changes occurring in local neighborhoods should be disclosed continuously in an accessible way so that citizens can make rational choices for themselves.

The goal of housing policy is to widen the paths through which citizens can make rational choices. Temporary freeze measures built around control do not last long. With minimal intervention, smooth financial intermediation, and predictable rules, the market can find its own balance, and the ladder can be restored for young people and those without homes. What is needed now is a standard that does not waver and promises that are kept.

Sung-no Choi

President, Center for Free Enterprise (CFE)

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Original title: 부동산 규제로 멈춘 시장, 사라진 사다리

Author: Sung-no Choi

Date: 2025-10-30

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28239