Permit or Peril: Korea’s Land Deal Dilemma
In March 2025, the Seoul Metropolitan Government reinstated the Seocho, Songpa, Gangnam, and Yongsan Districts as areas subject to the land transaction permission system, 35 days after it had been lifted. Repeated shifts in policy have caused confusion among consumer housing plans, leading to a loss of public confidence in the system’s operation. In response, the Sungkyun Times (SKT) will highlight the social repercussions of the permission system and discuss ways to improve it.
Lines on the Land
-Permission to Live
The land transaction permission system is a scheme that demands prior approval from the local government when involving transactions of properties exceeding a certain size, particularly in areas with a risk of speculation. Under Article 24 of the Act on Report on Real Estate Transaction, local heads can designate such areas for up to five years. When purchasing a property in regulated areas, buyers must prove that the acquisition is for residential purposes only and occupy it within two years. This system prevents housing prices from rising in areas with high demand, discouraging property speculation. It also stabilizes the real estate market, allowing for the efficient implementation of urban planning. In fact, the regime was first introduced in Daejeon City in 1978 to prevent speculation due to the rapid increase in demand. Currently, 27.11% of Seoul City’s area, including the Gangnam, Seocho, and Songpa Districts, is designated as regulated because of aggressive transaction risks. Today, the system remains key to curbing speculation and protecting housing stability.
-Politics Behind the Permit
Korea’s land transaction permission system has undergone transformations in its operation methods, alongside changing administrations. For example, in 2014, during the Park Geun-hye administration, the government lifted restrictions on land transactions in some areas. It pursued overall deregulation to revitalize the housing market amid concerns about the economic downturn. In contrast, during the Moon Jae-in administration in 2017, their primary policy goal consisted of stabilizing the real estate price. The government actively enforced the permission system mainly in Gangnam, Songpa, and Mapo Districts in Seoul City, where speculative demand was concentrated. Most recently, in 2022, with the former Yoon Suk-yeol administration, the government initially lifted the permit zone in some regions to restore market autonomy, but ended up strengthening the regulatory stance as signs of a housing price surge appeared. Throughout time, the land transaction permit system’s operation has changed depending on the government’s policy stance and market conditions.
Cracks Beneath the Policy
-When Protection Becomes Pressure
Although it was initially designed to curb speculative demand, the land transaction permission system is also criticized as an anti-market system that infringes on private property rights in the name of stabilizing the housing market. According to the Korea Economic Daily in April 2025, Dr. Song Hyun-dam, who served in the policy division of the Korea Housing Builders Association, said, “Limiting or prohibiting freedom of disposal, the main content of property rights, makes us suspect that it violates the Article 23 of the Constitution which guarantees private property rights.” Moreover, unlike the typical method of reporting transactions after the contract, the current permission system supposes a pre-authorization method, which is inconsistent with real transaction practices. Real estate contracts typically resemble a speed battle in which quick decision-making and funding timings are crucial, but the permit system delays this process, during which sales or conditions can be withdrawn and changed. Furthermore, if the permit is ultimately not granted, the transaction becomes invalid, and if the contract is concluded without prior permission, the responsible party may be subject to criminal punishment. Ultimately, the system burdens actual buyers’ property rights and the overall transaction process due to restrictions that do not reflect on-site conditions.
-The Balloon Effect
Overly restricting land transactions can also lead to adverse outcomes, such as the balloon effect, which refers to a phenomenon where suppressing one issue results in a new problem arising at another point. This can be observed in the real estate market when regulations are concentrated in a specific area, which causes demand to move to an unregulated area, ultimately triggering a price rise. Such occurrences have persisted over time. For instance, following the Gangnam District regulation in 2003, the housing prices in neighboring regions, Bundang District and Yongin City, soared by 25% and 20% respectively. This shows that demand constantly relocates to avoid constraint. Though it may seem that regulations can control the market, demand itself cannot be eliminated. The key issue of this balloon effect is that it creates confusion in the housing plans of genuine buyers. According to an interview with the SKT, Oh, a woman in her thirties living in Seoul, said, “We planned to move to the Jamwon Neighborhood in Seocho District for several years, but the sharp rise in housing prices within just a few months, following the designation of the nearby Apgujeong Neighborhood as a land transaction permit zone in April 2021, has made it increasingly difficult.” Such an unexpected price surge shrinks consumers’ housing stability and leaves them with continuous uncertainty.
From Control to Coherence
-Rules That Respect Rights
To address concerns about potential property rights violations under the land transaction permission system, the government should establish and apply consistent, welldefined standards for designation and withdrawal. By basing these standards on measurable factors, such as indicators of speculative activity, the proportion of actual residency, and fluctuations in transaction volume, greater transparency and trust in the regulation process can be achieved. In an interview with the Korea Association of Realestators News (KAR News) in March 2025, Seo Jin-hyung, a professor of the Department of Real Estate Legal Affairs at Kwangwoon University, commented, “We need clear requirements for designation and cancellation, added to procedural clarity based on the conditions.” Such clear and consistent standards can contribute to ensuring the balance between legal legitimacy and private property protection. Moreover, it is necessary to improve the system so that consumers can apply for permission within a specific period even after the contract, to ease the unnecessary legal burden due to the complex transaction procedure. In fact, according to a 2019 study by Noh Han-jang, a real estate professor at Dankook University, flexible adjustments to allowing permission applications within 60 days would reduce the transaction burden of contractors and lead to enhanced substantial protection of rights.
-Bursting the Bubble Before It Spreads
To prevent negative balloon effects and increase the system’s effectiveness, complementary policies such as the expansion of housing supply can play a key role. According to an interview with Tax Finance News in March 2025, Woori Bank’s real estate research lab chief, Ham Young-jin, said, “If the rental market stabilization and housing supply are not expanded hand in hand, the permission system will most likely remain a short-term measure.” Since limiting transactions cannot completely eliminate demand, sufficient housing that can accommodate the shifting demand must be supported. The expansion of housing supply disperses demand, preventing prices from rising near the regulated areas. It is also vital to take administrative measures such as market monitoring and intensive inspection to block balloon effects in advance. Since the Seoul Metropolitan Government expanded the land transaction permission zone in March 2025, it has closely monitored transaction volume and price. At the same time, the Ministry of Land, Infrastructure and Transport (MOLIT) and autonomous district governments are also jointly investigating any policy violations, strengthening follow-up measures through on-site inspections of brokerage offices and suspicious transactions. For these measures to move beyond being a short-term solution, policies should be revised to establish a regular operating system, laying a foundation for fundamentally blocking side effects and effectively implementing complementary field management.
What began with the intention of stabilizing the real estate market now places an excessive burden on everyday lives. Before prices fluctuate any further, it is now time to design a system that balances both effectiveness and fairness. Kingos, pay close attention as the system regains legitimacy, enabling citizens to make safe housing plans without any unnecessary burden.