The government's announcement on the 7th regarding the 'activation of dwelling supply' indicates a shift in the role of the Korea Land & Housing Corporation (LH) to the main entity for public land projects in the metropolitan area. This is interpreted as a commitment to utilize LH to increase the speed of public dwelling supply and provide housing at prices lower than those of the private sector.
Private developers tend to move quickly on projects during real estate booms, but they often delay during downturns due to concerns about unsold units. This results in significant volatility in dwelling supply and often leads to high pricing to maximize development profits. The government's plan is to improve these issues and expand dwelling supply focused on actual demand by utilizing LH.
Experts generally expect that LH's proactive involvement will promote dwelling supply and lower pricing. However, there are concerns that this could further weaken LH's financial structure. Additionally, it has been pointed out that if dwellings are supplied in the outskirts of the metropolitan area, the effect on stabilizing prices in key areas like Gangnam, Mapo, Yongsan, and Seongdong will be limited.
◇ 75,000 units to be constructed over 5 years, LH takes the lead
According to LH, it plans to construct 75,000 dwellings by 2030. Of these, 53,000 units will be directly managed by LH, and it plans to secure an additional 7,000 units by optimizing land use through increased floor area ratios. To achieve this, the government plans to halt the sale of residential land it intends to sell and switch to direct implementation by LH through changes in district plans. Moreover, it aims to convert long-unused non-residential lands such as commercial and public lands to secure an additional 15,000 units by 2030.
Professor Seojin-hyung of Kwangwoon University said, "LH has secured a lot of land for self-sufficient facilities and commercial land while developing new towns, and there are many areas of this land that are not utilized and remain idle. Utilizing this for land provision will help alleviate the shortage of dwelling supply." Professor Kim Jin-yu from Kyonggi University also noted, "By shortening the process of developing land and selling it through auctions, the speed of dwelling supply can increase."
Park Won-gap, senior real estate expert at KB Kookmin Bank, said, "The government likely intends for LH, which has faced criticism for engaging in land trading, to transition into dwelling trading to resolve the supply cliff and provide affordable dwellings." He added, "Positive effects on the dwelling market are expected." Ham Young-jin, head of the real estate research lab at Woori Bank, said, "There might be a reduction in profit margins during the land development process, allowing for more affordable dwelling supply."
◇ Liabilities expected to exceed 200 trillion won soon… concerns over worsening financial situation
There are many concerns among experts regarding LH's direct implementation. Many professionals point out that if LH expands direct implementation, its liabilities may increase further.
According to LH's 'Mid-Term Financial Management Plan 2025-2029' report, the corporation's liabilities are expected to reach 170.1817 trillion won by the end of this year and 192.4593 trillion won by the end of next year. It is projected that by 2027, liabilities will exceed 219.5311 trillion won. The liability ratio is expected to rise from 226.1% this year to 239.0% next year and reach 250.5% by 2027.
Kim In-man, director of Kim In-man Real Estate Economic Research Institute, said, "It is questionable whether LH, which is already struggling with liabilities, has the capacity to implement such projects." Professor Kim Jin-yu also noted, "The workload for LH could increase, leading to a situation where liabilities rise more and the need to issue bonds arises."
Many forecasts suggest that there will not be a significant impact on stabilizing actual dwelling market prices. Even if land is quickly supplied for new towns in the metropolitan area, dwellings will not be available in outskirts for another 4-5 years, while the current market heating occurs in regions referred to as the Han River belt, including Gangnam, Mapo, Seongdong, and Yongsan.
Kim Hak-ryul, director of Smart Tube Real Estate Research Institute, stated, "One reason for the insufficient supply of dwellings in the metropolitan area is that people living in the provinces sell their local properties to purchase apartments in Seoul." He emphasized, "Without measures to disperse this demand to the provinces, simply increasing dwelling supply in new towns of the metropolitan area will not stabilize the market." Director Kim In-man also remarked, "Even if LH supplies dwellings in the outskirts in the next five years, it will not relate to the stabilization of dwelling prices in areas like Gangnam or the Han River belt."