Late regulations for Dongtan and Giheung, but when will supply come first?

The government on Tuesday designated Dongtan District in Hwaseong, Giheung District in Yongin and the city of Guri, all in Gyeonggi, as areas subject to a triple layer of real estate regulations: land transaction permits, speculative overheating controls and adjusted real estate market rules.

The designation imposes sweeping restrictions on mortgages, taxes, resales and subscription eligibility while also banning so-called gap investment, in which buyers purchase homes using tenants’ jeonse (lump-sum deposits). The move expands regulatory coverage about eight months after the government placed all of Seoul and 12 areas in Gyeonggi under the same framework.

Dongtan and Giheung have seen housing prices surge on expectations surrounding semiconductor investment and improved transportation links, while Guri has benefited from demand driven by its proximity to Seoul.

Dongtan, adjacent to semiconductor facilities operated by Samsung Electronics and SK hynix, has been among the biggest beneficiaries of the so-called shuttle station effect, referring to neighborhoods served by company shuttle buses and nearby rail stations. Apartment prices there have risen more than 10 percent this year. Given that prices had been climbing for months, criticism that the government acted too late is difficult to dismiss.

The latest restrictions will likely cool overheated markets in the short term by sharply limiting transactions. Yet the steep rise in housing prices during the past year illustrates the limits of policies centered primarily on suppressing demand. Speaking at a forum last week, presidential chief policy secretary Kim Yong-beom stressed that expanding housing supply had become so urgent that the government should simply “build first.”

He acknowledged, however, that coordinating ministries and local governments remains difficult. Proposals to develop greenbelt land face resistance, while converting industrial sites in areas such as Yeongdeungpo into housing also draws objections because of concerns about preserving Seoul’s manufacturing base. Kim nevertheless asked a fundamental question: If every proposal is rejected, where are young people supposed to live?

The government’s concern about increasing housing supply is understandable, but uncertainty remains. Although it announced supply measures in September last year and again in January, progress has been slow where demand is strongest, particularly in urban centers.

Only practical policies that accelerate redevelopment and reconstruction while expanding housing where people actually want to live will restore confidence and calm the market. The government should quickly demonstrate through action that its pledge to prioritize housing supply is more than a slogan.