Lee Hyun Jung walked out of a real estate office in Seoul's affluent Gangnam district thinking she had found her $450,000 dream home. A week later the asking price for the 1,173-square-foot apartment had jumped $10,000. The owner then took it off the market because smaller properties in the building were selling for $500,000.

Welcome to Seoul's surging property market.

Prices of apartments in Gangnam, home to Gucci Group NV and Rolls-Royce Motor Cars Ltd. stores, rose nearly 20 percent in the first half of 2005, as record-low borrowing costs spurred a 12 percent increase in home loans.

"Friends who live in Gangnam have seen their apartment prices jump," said Lee, a 37-year-old mother of two who lives in Mapo, north of the river that bisects Seoul. "It's not fair that their property prices jump, just because they're in Gangnam."

In an effort to curb speculation, South Korean President Roh Moo Hyun more than doubled taxes for owners of the priciest properties and raised levies on profits from selling real estate. Analysts and academics say the measures may fail to restrain prices in Asia's third-biggest economy, where the total land value is twice that of Canada, a country 100 times South Korea's size.

"Property prices have surged," said Park Won Am, a professor of international trade at Hongik University in Seoul. "It's a big question mark whether the policies would drag prices back to earlier levels."

Roh's government is seeking to chip away at a landowning structure in which 1 percent of the nation's households own a third of the nation's land.

Homeowners buying multiple apartments, sometimes under their spouse's or children's names, spurred a doubling in value of the index tracking construction stocks in the past year, the best performance among industry groups in Korea.

A 101-pyong (3,584-square-foot) apartment in the Gangnam Tower Palace complex is changing hands for 4.15 billion won ($4 million), according to Tower Palace Real Estate, a 66 percent increase from November 2002 when the block was built.

For that money, owners get a fingerprint-scanning entry system and 24-hour security patrol as well as a pool, sauna, fitness center and banquet room.

The government says speculative gains are discouraging corporate investment and making individuals reluctant to spend.

Orders for machinery slumped 12 percent in June from a year earlier, the fifth consecutive decline, while consumer confidence fell for a fourth month in July, official figures show. Roh's government on July 14 cut its forecast for economic growth this year to 4 percent from 5 percent.

"Money doesn't flow into productive areas of the economy because of a boom in the property market," Ahn Byong Yub, a lawmaker in charge of the ruling Uri party's real estate policy planning team, said on Aug. 19. "Without bursting property bubbles, the nation's economy is likely to face another round of crisis as it did during 1997-98."

Home prices slumped as much as 45 percent in the aftermath of the Asian financial crisis, J.P. Morgan Chase & Co. analysts Paul Rhee and Kim Suhr Hee wrote in an Aug. 24 report. The relaxation of controls allowed owners to charge market prices in February 1998, spurring a revival in prices, they said.

Under the new rules, owners with two or more apartments valued at $2.2 million will pay $26,530 in taxes by 2009, up from $9,700 this year, according to the finance ministry.

Taxes will more than double for homeowners reaping big profits from selling a second home after three years, the ministry said.

"Property speculation is finished," Han Duck Soo, the country's finance and economy minister, said at a briefing on Aug. 31.

Still, the government's policies are undermined by the Bank of Korea's reluctance to raise borrowing costs.

Central bank governor Park Seung said on Aug. 11 that higher rates shouldn't be used to cool rising property prices. The Bank of Korea left its key interest rate at an all-time low of 3.25 percent for a ninth straight month in August to spur investment.

The nation's land value climbed 19 percent in the year ended April 30, according to the construction ministry's survey of taxable land.

"Many people and companies are addicted to the misconception that property prices won't decline," said analyst Kang Kyeong Hoon, a research fellow at the Korea Institute of Finance. "Until this is broken, it's hard to expect record-low rate policies to generate the effects that the government targets."

Roh, who reached the midpoint of his five-year term last week, made curbing speculation one of his key goals. In October 2003, he imposed taxes of as much as 60 percent on profits reaped by homeowners who held more than three properties.

Still, apartment prices in Gangnam rose as much as 18 percent in the first six months of this year, according to the Korea Housing Institute's survey of 239 real estate agents. Prices of similar properties north of the Han River rose 8 percent or less in the same period.

"The government should show its commitment to reining in property speculation and channel the money" to productive areas of the economy, Kang said. "It can generate a shock, which may be necessary to channel funds in a positive direction."

Roh's government this week also told banks to stop customers from taking out home loans in their spouse's or children's names to deter buyers from circumventing ownership taxes.

About 5 percent of households own two or more apartments, houses and flats in Korea, according to the home affairs ministry, while 45.4 percent of households, defined as families or single wage earners, rent their property.

Home buyer Lee said she's can't purchase her dream home, so she is trying to boost the value of her existing apartment, which is 10 percent larger and on a higher floor than the Gangnam flat.

Lee and her neighbors meet twice a month to discuss ways to "revalue" their apartments to match flats across the river in Gangnam, including agreements not to sell below a certain price.

"The agent told me that the owners don't want to sell anymore," Lee said about the Gangnam apartment. "They want to see how high the prices will go."