Is the Re-Designation of the Land Transaction Permit System Really Okay?

The Land Transaction Permit System, which had been lifted, has been reinstated after just 35 days, sparking controversy. The designation has been expanded beyond Jamsil, Cheongdam, Daechi, and Samseong—where the system had been lifted—to include all three Gangnam districts and Yongsan District. As a result, confusion in the real estate market has deepened, and anxiety among end-users has grown even greater.

Rising real estate prices can be seen as part of the normalization process of a market freed from regulation. The Land Transaction Permit System was introduced to suppress property prices, but pent-up demand did not disappear. The sharp surge in prices as soon as the regulation was lifted is proof of that. Even so, reimposing the regulation undermines administrative credibility. When policy lacks consistency, market participants are bound to face confusion.

Restrictions on transactions are one of the factors that undermine public welfare. Real estate is not merely an investment vehicle; it is an essential element of everyday life. When the market does not function properly, housing stability is shaken, which directly leads to a decline in welfare. Frequent reversals in real estate policy increase market uncertainty, and the damage is felt most acutely in areas closely tied to daily life.

It is desirable for the real estate market to operate autonomously according to the principles of supply and demand. Prices naturally move toward equilibrium, thereby achieving efficient resource allocation. Artificially blocking the flow of the market cannot be a fundamental solution. Suppressing transactions in one area inevitably produces side effects, such as demand shifting to neighboring areas and fueling price increases there.

The solution to real estate problems lies not in suppressing demand but in expanding supply. Preventing transactions in a situation of strong demand does not solve the underlying problem. Rather, supply must be increased so that excess demand can be absorbed, allowing the market to regain balance. Prices stabilize and the market functions properly only when supply aligns with demand.

The Land Transaction Permit System inherently infringes on freedom of residence and property rights. In areas subject to the system, the voluntary choices of end-users seeking to relocate or dispose of assets are restricted by administrative regulation. This has the potential to undermine individuals’ basic rights and, in the long run, may lead to market distortions and reduced investment. Protecting property rights and guaranteeing free economic activity are among the government’s basic responsibilities. That is why criticism of excessive regulation carries such weight.

Government policy should be pursued carefully and consistently. In particular, reintroducing a regulation like the Land Transaction Permit System is an act of distorting the market according to political needs. From a long-term perspective, it is desirable to seek fundamental solutions by preserving market autonomy and expanding supply. The time has come to consider how to help the market function on its own rather than relying on regulation.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 토지거래허가제 재지정, 이대로 괜찮은가

Author: Sung-no Choi

Date: 2025-04-09

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=27518