Real Estate Regulations That Push Gangnam Home Prices Even Higher

Regulations have repeatedly been imposed under the banner of curbing housing prices, but in Gangnam they have consistently produced the opposite result. Claiming to suppress speculative overheating, the government has tightened lending, raised taxes, and even added the Land Transaction Permit System.

The policy goal is “stabilizing housing prices in Gangnam,” but what actually appears in the market is a sharp freeze in transactions and price rigidity. Rather than falling, prices become more resistant, and after some time new record highs reappear. The more regulations target Gangnam, the more they reinforce its scarcity—an irony that keeps repeating itself.

When transactions are blocked, the market temporarily quiets down. But quiet does not mean stability. Regulations that restrict transactions themselves—such as expanding Land Transaction Permit Zones or designating speculative overheating districts—do succeed in reducing the act of buying and selling. The problem comes next. When transactions disappear, the market loses the basis for judging what an appropriate price actually is.

Prices are discovered through transactions. In a market without transactions, only asking prices remain, and even minor news causes large swings and greater uncertainty. In the end, regulations that freeze the market do not lower prices so much as distort price signals, making it even harder for end-users to make sound judgments.

Gangnam has a structure in which the shock of regulation does not easily translate into falling prices. Its location—formed by the combination of excellent school districts, private education infrastructure, access to key business districts, dense transportation networks, and convenient amenities—creates not just simple preference but demand that is difficult to substitute. At the same time, Gangnam is already a fully developed area, so new supply is limited.

Reconstruction and redevelopment are the key channels for expanding supply, but progress has been slow due to overlapping factors such as the excess profit recapture system, price caps on pre-sale housing, permit and approval delays, rising construction costs, and tightened project financing. In a market where supply is blocked, regulation does not push prices down so much as further intensify scarcity.

Regressivity is the biggest side effect of regulation. The stronger the regulations become, the first to exit the market are those with insufficient cash reserves. Lending regulations cut off the ladder for young people and newlyweds who need leverage. By contrast, those with strong cash mobilization capacity continue transacting even under heavy regulation.

As a result, regulations may appear to apply “the same standard to everyone,” but in reality they impose greater disadvantages on specific groups. The moment the Gangnam market becomes a cash-centered market, prices become more likely to hold firm rather than fall. That is why regulation ceases to be a housing price stabilization measure and instead turns into a mechanism that widens class disparities.

Concentration is also a phenomenon created by regulation. When heavy regulations are imposed in an effort to suppress Gangnam, demand does not disappear—it changes direction. When it moves to less regulated areas, prices stir there; when regulations follow, demand spreads again to other areas. This is the so-called balloon effect. At the same time, even within Gangnam, the pattern in which “only the winning locations keep winning” grows stronger. Capital flows into products that remain clearly preferred despite regulation—such as new builds, properties right next to major transit stations, and core school district areas. Rather than stabilizing prices across the board, regulation creates a structure in which premiums become even more concentrated in one place, pushing up Gangnam’s symbolic benchmark prices.

Taxes, too, have functioned less as a means of controlling housing prices than as a way of blocking transactions. When the burden of transaction taxes such as capital gains tax and acquisition tax rises, people cannot sell even if they want to. If they sell, their losses from taxes become so large that they cannot buy a similar home again.

The moment transaction costs rise, the housing market loses liquidity. The approach of “using taxes to curb speculation” does not make the market healthier; rather, it restricts freedom of residential mobility and, in Gangnam where demand is strong, eliminates the very channel through which prices could fall.

The solution is simple: shift the objective from price control to housing stability. Regulation should not mean “blanket blockage” but “minimal intervention.” Above all, supply channels must be opened. The predictability of reconstruction and redevelopment must be improved, permit and approval times reduced, and the supply of quality housing land in urban centers and surrounding areas maintained steadily.

Gangnam housing prices are not figures that can be suppressed by regulation. What is needed now is not wavering control, but principles that are upheld and sustainable supply.

Gwang yong Go, Policy Director, Center for Free Enterprise (CFE)

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Original title: 강남 집값 더 밀어 올리는 부동산 규제

Author: Gwang yong Go

Date: 2026-01-19

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=28510