The first real estate policy of the Lee Jae-myung government, which aims to supply 1.35 million dwellings in the metropolitan area by 2030, has been announced, but projections suggest it will be difficult to quell immediate concerns about supply shortages. While stable supply of dwellings led by the public sector and reasonable pricing are possible, the supply measures have not been detailed enough to alleviate market anxieties. There is also an opinion that expansion of private supply, where housing demand is high, needs to be pursued concurrently.
On the 7th, the government announced a 'housing supply expansion plan' through a real estate-related ministerial meeting, which includes supplying 1.35 million dwellings in the metropolitan area over five years.
The key to this housing supply plan is the strengthening of publicness. While previous measures primarily supported the expansion of supply by private construction companies, this new plan significantly expands the role of the Korea Land & Housing Corporation (LH) and other public entities.
◇Limited private supply…Direct implementation by LH adds stability
Experts noted that it will be difficult for this supply measure to produce immediate effects. There is a view that the focus on public-led housing supply limits the anticipated expansion of private housing supply in the market.
Professor Seo Jin-hyung of Kwangwoon University's Department of Real Estate Law said, "The public housing-centered measures have limitations in stabilizing the market," adding that "there must be solutions for supply to occur in the private sector."
Kim Hyo-sun, chief real estate officer of NH Nonghyup Bank, stated, "This housing supply expansion plan is a proposal on how to supply a suitable quantity for areas needing housing, so it does not have the nature to show immediate effects upon implementation," and emphasized that "this housing supply plan effectively demonstrates the direction and intent of the current government."
There are evaluations that the direct implementation of LH's public land development projects, which is considered the core of this plan, has provided stability to the supply measures. There are also observations that reasonable pricing will reduce the burden on actual users.
This measure involves LH directly implementing projects without selling land to private construction companies. Private construction firms will only be responsible for design and construction. The apartments built this way will be secured as public housing. The quantity of dwellings to be supplied through LH's direct implementation over five years is 60,000.
Ham Young-jin, head of the real estate research lab at Woori Bank, interpreted this as a strategy to increase the rate of housing supply in the metropolitan area by expanding public-led housing supply, stating that "If the price ceiling system is applied through LH's direct implementation, the adverse effects of high prices can be partially mitigated, while the supply of apartments affordable to actual users will likely increase."
However, there are opinions that it will be difficult to supply 'cheap, good dwellings' through LH's direct implementation.
Researcher Lee Eun-hyung of the Construction Policy Research Institute noted, "Direct implementation can be highly evaluated as a new attempt that did not exist before," but added that "direct implementation is not an easy matter." He further commented, "The quality of completed apartments may not be much better than that of public apartments," expressing concern about whether luxurious apartments can be supplied cheaply and in large quantities.
Along with this measure, there is also a call for incentives to expand private construction company's supply. Head Ham noted, "Private construction companies that may feel relative deprivation from LH's direct implementation of public land and other areas are expected to concentrate on receiving contracts for public land construction or urban renewal projects," and added that "if an environment is created for easier housing supply through expanded public guarantees and improvements to the licensing system, the willingness of the private sector to supply may not be significantly suppressed."
◇Utilization of aging public buildings and idle land: 'Implementation is key'…Maintaining the excess profit recovery system has 'limitations'
Experts have evaluated the government's announcement to supply housing through the utilization of aging public buildings and idle land as one where "the key is the effectiveness of implementation."
The government included in this measure a plan to enact the 'Special Act on Complex Development of Aging Public Offices' to maintain or renovate public offices or state-owned land that has been unused for a certain period. It also decided to supply housing in idle land located in the downtown area of Seoul, such as the baseball field of Sungkyunkwan University (1,800 dwellings), Wirye Business District in Songpa (1,000 dwellings), Korean Educational Development Institute (KEDI) in Seocho (700 dwellings), and existing facility relocation site in Gangseo (558 dwellings).
Chief Kim noted, "As with past plans to utilize idle land, there are still complex procedures left for practical commercialization, such as resident consultations, urban planning changes, and budget issues, so the key will be implementation speed," and emphasized that "the complex development of idle land and public offices and the repurposing of existing facilities are more of a supplementary role rather than mainstream in housing supply, and these are actually issues that have been raised for quite some time."
While conditions for supplying housing in urban areas have been established as a way to revitalize redevelopment and reconstruction projects, there are points of disappointment in the maintenance of policies like the excess profit recovery system (revenue sharing system). The researcher noted, "While discussing the activation of private redevelopment projects, the topic of revenue sharing was omitted," stressing that "this will serve as an obstacle that increases the additional burdens on association members in reconstruction projects, so this issue needs to be addressed in the future."
Assessments suggest that reducing the loan-to-value ratio (LTV) in the metropolitan area and regulatory regions and limiting jeonse loans for single homeowners could serve as a catalyst to reduce speculative demand in the housing market. Head Ham noted that "the expansion of authorities for designating areas of land transaction permits in housing price volatile regions, additional regulations on LTV in regulatory regions, and restrictions on jeonse loans for single homeowners will establish a foundation to reduce speculative demand in the housing market beyond FOMO (fear of missing out)."
However, there are also opinions that the perceived effect of market participants in regulatory zones may not be significant, as the measure limiting mortgage loans in regulatory zones has already been implemented. Chief Kim noted that "as per the 6.27 measures, the effective LTV is felt to be around 20-40% when based on the average apartment sale prices in regulatory zones," and added that "while restrictions on jeonse loan limits and other aspects related to the rental market may be necessary in the long term, if rapid supply is not guaranteed, the shift to monthly rents may accelerate and increase the burdens on low-income households," stating that "a detailed approach for additional housing security measures for low-income households until the effects of supply are felt is necessary."