About one month has passed since the government rolled out measures to boost the sluggish real estate market. The centerpiece of the policy was to offer tax benefits and ease financing limits.

Despite the policy and such positive economic indexes as soaring stock prices, however, the market has no signs of rebounding. Moreover, there are growing concerns of a further contraction in housing sales, due to unstable real estate markets caused by bankruptcies of some builders.

Creditor banks have been reluctant to roll over a number of the project financing loans, worrying that many debtors may go bankrupt.

Some other market watchers attribute the sluggish transactions to frequent government policy changes, which they say is a major factor making potential buyers hesitate to purchase homes.

“The housing market has been sluggish since the onset of the financial crisis in 2009. Regulation changes have been made so rapidly,” Park Jae-ryong, a research fellow at Samsung Economic Research Institute, told The Korea Herald. “The market is experiencing a transaction-freeze partly due to trial-and-error caused by policy changes.”

The latest package of measures to shore up the property market came on March 22 and it included the halving of acquisition tax from 2 to 1 percent for homes valued at 900 million won ($833,221) and below. But the change brought fierce opposition from local governments as it meant less tax revenue for them. The tension between the central government and local administrations left the bill up in the air for nearly a month, causing confusion in a market waiting for clear signs.

The revised regulation is waiting for final approval from the National Assembly.

“Some home buyers waiting to move in at the end of March refused to finalize their payment because they didn’t know whether they were subject to lower acquisition tax at the point of purchase,” said a real estate agency operator who asked to remain anonymous.

The government’s March 22 policy came less than two months after it took action to lower the loan rate from 4.5 percent to 4 percent for households with an annual income of 30 million won ($26,800) or less.

Market watchers said such rapid regulation changes are creating a lock-in effect where buyers and sellers stay inactive.

“Regulations need a lifespan of at least 5 to 10 years but here we have been seeing too many changes and this leaves the market frozen,” said Kim Dong-yul, chief economist at Hyundai Research Institute.

Real estate brokers complain about the extremely sluggish market, citing as an example the data of housing transactions in Gaepo-dong, southern Seoul, which has been a barometer of the market.

According to the figures, there were only four home transactions in the four apartment blocks with a combined 10,400 households in the region, down from 31 in March.

Market analysts believe it would be difficult to expect a big margin through investment in real estate.

“Investors won’t be able to raise big returns off their property purchases because prices aren’t likely headed for jumps due to the low birthrate and rapid aging,” a researcher of Hyundai Research Institute said.

“Such demographic changes will accelerate the trend toward the rent system,” he said.

By Cynthia J. Kim (cynthiak@heraldcorp.com)