High-Intensity Housing Regulations Spark Public Backlash and Fears of Real Estate Bubble Burst

Fifteen Seoul district heads demand reversal of land transaction permit zones
Homebuyers face barriers if housing prices exceed $11 million
LTV cap cuts restrict purchases even below $11 million threshold

On October 15, President Lee Jae-myung’s administration unveiled its third set of real estate measures, designating all of Seoul and twelve regions in Gyeonggi Province as regulated zones. The move has made it increasingly difficult for genuine homebuyers to purchase property. The combination of strict lending limits and reinforced occupancy requirements has heightened financial burdens, even for those targeting mid-priced apartments. Critics say the policy effectively blocks middle-class access to home ownership.

Ruling Party Pushes Legislative Action to Ease Public Anger

On October 23, according to industry sources, the Seoul District Mayors’ Council and fifteen district heads held a joint press conference at City Hall, demanding the immediate withdrawal of the “October 15 Real Estate Plan.” They condemned the measure as one that “undermines local autonomy and infringes upon citizens’ property rights.” The statement was endorsed by fifteen mayors, including Songpa District Head Seo Kang-seok—who chairs the council—and the heads of Jongno, Jung, Yongsan, Gwangjin, Dongdaemun, Dobong, Seodaemun, Mapo, Yangcheon, Yeongdeungpo, Dongjak, Seocho, Gangnam, and Gangdong Districts, all affiliated with the ruling People Power Party or independents.

“The land transaction permit system represents one of the most restrictive interventions into private property and should be applied only in exceptional cases, through targeted measures,” the mayors said in a joint statement. “This decision was made unilaterally without consultation with the Seoul Metropolitan Government or local districts, disregarding the cooperative framework of local governance.” They further argued that “Seoul and its districts have been promoting housing supply through accelerated redevelopment and reconstruction planning,” stressing that “stabilizing the housing market should come through expanded supply and administrative support, not tighter regulations.”

Amid growing public discontent, the Democratic Party launched a special task force (TF) on housing market stabilization to contain the backlash. The TF aims to prioritize housing supply expansion through redevelopment and reconstruction, with plans to pass related bills within the year. Key legislative items include the Special Act on Public Housing, the Special Act on Urban Redevelopment Promotion, and the Urban and Residential Environment Improvement Act. In coordination with the Ministry of Land, Infrastructure, and Transport’s plan to add 50,000 new housing units, the TF also intends to introduce bills that relax building height limits and streamline permit processes.

Cash-Rich Buyers Gain Ground as Borrowers Struggle

Despite the ruling party’s response, resistance remains strong among residents. Many prospective homeowners who had planned to purchase through presale lotteries now face major setbacks due to tightened loan-to-value (LTV) ratios and mandatory occupancy rules. In designated zones across Seoul and Gyeonggi Province, even lottery winners will struggle to secure financing if their property value exceeds $11 million, as mortgage limits drop from $4.5 million to $3 million. Analysts warn that such uncertainty could push buyers toward cheaper markets—or out of the market entirely.

Meanwhile, cash-rich investors stand to benefit. The combination of tighter lending restrictions, mandatory residency, and stricter reapplication limits has effectively sidelined middle-class participants. All designated areas are classified as “adjusted” or “overheated speculation” zones, where second lottery wins are banned for up to ten years. For example, Raemian Trinion in Samseong-dong, Gangnam—which begins accepting presale applications later this month—has an estimated price of $15 million for a 635-square-foot unit. Buyers can only borrow between $1.5 million and $3 million, meaning that unless one has sufficient cash on hand, applying for such properties is virtually impossible despite the potential for multimillion-dollar appreciation.

As a result, criticism is mounting that policies meant to curb speculative demand for luxury properties are instead depriving middle-class households of the chance to own a home. The Financial Services Commission explained that lending caps were lowered to cool overheating in the high-end housing market around Seoul, yet it has failed to provide supporting data. Moreover, the new rules are not limited to luxury homes. With the LTV ratio for Seoul and twelve Gyeonggi regions cut from 70% to 40%, even homes below the $11 million mark are now beyond the reach of many buyers.

Learning from China’s Policy Reversal

Some experts warn that excessive credit restrictions could trigger a real estate correction—or even a bubble collapse. China provides a telling example. In 2021, Beijing introduced the “three red lines” policy (debt-to-asset ratio, net gearing ratio, and cash-to-short-term-debt ratio) to rein in corporate leverage across its property sector. The government also imposed value-added taxes on housing transactions, raised fees on short-term sales, and enacted regional home-purchase bans.

Although designed to curb speculation and financial risk, the prolonged enforcement of these rules over three years plunged major developers into financial distress, shaking market confidence. The most notable fallout was the collapse of China Evergrande Group, once the country’s second-largest property developer. Burdened with $300 billion in liabilities, Evergrande defaulted on a U.S. dollar bond interest payment in December 2021 and was subsequently ordered into liquidation by Hong Kong’s High Court in January 2024.

Ultimately, Beijing reversed course in August 2025. To reduce mounting housing inventories—especially in suburban areas—local governments began rolling out stimulus measures ahead of the traditional September–October buying season. In Beijing, the government eased restrictions on the number of homes households could buy and revised the public housing fund program to boost affordability. Other cities, including Shanghai, Tianjin, Xi’an, and Suzhou, have followed suit by loosening mortgage rules, promoting urban renewal, and offering home-purchase subsidies to revive demand.