On June 3, ahead of the early presidential election, there is no expectation for new policies in the real estate market. Rather than new policies, it is urgent to remove the nails driven in by the 'Moon Jae-in administration,' regardless of who is elected. There is no need to recite all 28 real estate policies. The regulations that caused the supply of apartments to plummet until 2028 must be addressed immediately.
The excess profit recovery system for redevelopment (recovery system) is the first nail. The recovery system is a system that requires members of a reconstruction association to pay back up to 50% of any amount exceeding an average of 30 million won in profits per person gained from reconstruction. Implemented in 2006 during the Roh Moo-hyun administration, the recovery system was suspended due to the housing market stagnation during the Park Geun-hye administration from 2013 to 2017. It was reinstated in January 2018 after the Moon Jae-in administration began. While the Yoon Suk-yeol administration eased the excess profit threshold to 80 million won, many believe that this is still insufficient. The People Power Party proposed a bill to abolish the recovery system as the first bill of the 22nd National Assembly last year, but it remains stalled.
The recovery system is considered a regulation that prevents the supply of dwellings due to reconstruction. The repeated 'policy failures' have caused housing prices to skyrocket, and fees have also surged. Some reconstruction complexes are holding firm even after completion, while local governments remain indifferent. There are 31 complexes affected by the recovery system, just in Seoul. The estimated fee per household is around 166.77 million won. As of the 17th, more than 30,000 people have agreed to a public petition requesting the abolition of the recovery system. If they reach 50,000 by the 23rd, it will be submitted to the relevant standing committee in the National Assembly for formal discussion. Given that the recovery system has been influenced by the ruling powers, voters' sentiments regarding real estate will closely watch this situation ahead of the presidential election.
The third phase of the new town project announced at the end of 2018 by the Moon Jae-in administration also needs revision. Continuing with regulations led to rising housing prices, prompting a large-scale supply measure. However, a concrete plan was missing, and conflicts over compensation led to repeated delays. Criticism about the initial lack of supply has continued. The initially planned supply was around 240,000 units. The Yoon administration has been pushing to increase the supply, but it still doesn't reach half of the second phase of new towns (610,000 units). The area dedicated to parks and green space (34%) and self-sufficient land (19%) is excessive, while the floor area ratio (196%) is considered low. For reference, the floor area ratio for the first phase of new towns was 300-350%.
In the reconstruction market, there are rumors that 'if the Democratic Party of Korea comes to power, the recovery system will definitely return.' At drinking gatherings, there are joking remarks that if Lee Jae-myung, the Democratic Party of Korea candidate, is elected, 'the rich who endured the comprehensive real estate tax back then will become richer.'
Anxiety grew in the market as it was revealed that the housing committee of the Democratic Party of Korea's policy development body 'Minseong Yeonseok Meeting' was filled with extreme pessimists and regulation proponents. Lee Jae-myung, the Democratic Party of Korea candidate, said in February, 'It seems best to avoid touching real estate policies as much as possible.' Regardless of who wins, it would be preferable to remove the nails and refrain from further regulation, if one hopes that the joking remarks at drinking parties do not become reality.