To stabilize the jeonse and monthly rent market, the government will supply 90,000 non-apartment purchase-and-lease units in the greater Seoul area through next year. Of these, 66,000 units will be concentrated in regulated zones in Seoul and Gyeonggi. In response to the fallout from jeonse fraud and the tightening of real estate project financing (PF), the government plans to rapidly supply, over a short period, non-apartments that had shrunk in the private market by purchasing them for lease.
The Ministry of Land, Infrastructure and Transport said on the 22nd that it will supply 90,000 purchase-and-lease dwellings in the greater Seoul area from this year through next year, with 66,000 of them concentrated in regulated zones in Seoul and Gyeonggi.
Non-apartments are a means to supply dwellings quickly within city centers. However, in recent years, supply has plummeted as financing became difficult due to the aftermath of jeonse fraud and the tightening of real estate PF. Over the past three years, non-apartment groundbreakings have shrunk to 20%–30% of the long-term average.
Kim Young-guk, head of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport (MOLIT), said, "With supply in the private non-apartment market—an important rung on the housing ladder—contracting, the public sector will actively move to purchase and supply units to help normalize the market," adding, "To stabilize the jeonse and monthly rent market, among other aims, we will continue to prepare measures to expand the supply of non-apartments and other dwellings."
◇ Concentrated supply in regulated zones… partial purchases allowed to secure volume
The Ministry of Land, Infrastructure and Transport (MOLIT) will dramatically expand purchase-and-lease volumes centered on regulated zones. Over the next two years, 66,000 units—73% of the 90,000 greater Seoul purchase-and-lease units—will be supplied to regulated zones through new-build purchase agreements and purchases of existing stock. This is about double the 36,000 units supplied over the past two years. For new-build purchase supply within regulated zones, the figure will expand from 34,000 units over the past two years to 54,000 units.
To secure purchase volume, the ministry will also allow partial purchases rather than only whole-building purchases. Previously, an entire 100-unit establishment had to be purchased; going forward, partial purchases of 10–50 units out of 100 will be allowed. In addition, the minimum purchase threshold within regulated zones will be relaxed from the current Seoul 19 units and Gyeonggi 50 units to 10 or more units for both Seoul and Gyeonggi.
For purchases of existing dwellings, only within regulated zones, the building age limit (10 years or less in other areas) will be waived to expand eligible targets and volumes. Until non-apartment supply normalizes, MOLIT plans to push purchases in regulated zones beyond the original target volumes to serve as a priming pump for a recovery in the non-apartment market.
◇ Stronger funding support by stage for new-build purchases
MOLIT will also resolve developers' financing issues. To enable early groundbreaking and completion after a new-build purchase agreement, it will provide initial project cost support before groundbreaking and pay construction costs based on work progress.
LH will raise land acquisition support payments to as much as 80% of land costs. Remaining land costs and design fees—initial project costs—will see strengthened PF loan guarantee support from the Korea Housing & Urban Guarantee Corporation (HUG), sharply lowering developers' financing burdens to around 10% of land costs and spurring private participation.
After groundbreaking, the payment method for purchase prices will be improved from the existing three-stage schedule (after structural work, completion, and quality inspection) to payments based on work progress at three-month intervals.
MOLIT will enhance transparency by managing support funds through trustee agencies handling proxy tasks. LH and HUG will secure priority beneficiary rights in trusts to prevent project deterioration.
In addition, to shorten developers' design timelines and standardize the quality of purchase-and-lease dwellings, LH will distribute a variety of high-quality standard floor plans from the design stage and provide pre-consulting support.
In particular, for projects currently under cost-indexed agreements, a "groundbreak first, verify construction costs later" approach will be introduced to move up groundbreaking timelines. For projects where land acquisition or permitting has been delayed for a long time, the government will strengthen project management by imposing penalties such as terminating agreements.
◇ Market: "Some jeonse and monthly rent demand will be absorbed… developers' unsold inventory risk burden will be reduced"
The market expects that the government's expanded purchase-and-lease program will absorb a portion of the jeonse and monthly rent demand for dwellings. However, some also noted that to prevent haphazard development as non-apartment supply expands, authorities must fully consider urban infrastructure carrying capacity. Others said additional measures are needed that reflect broader market conditions favoring apartments.
Nam Hyuk-woo, a researcher at Woori Bank, said, "If high-quality new lease units are concentrated in key areas of the greater Seoul area for the non-apartment market—where supply has collapsed due to the aftermath of jeonse fraud and the tilt toward apartments—we expect to absorb some of the demand from people in their 20s and 30s and newlyweds who want to enjoy urban infrastructure."
At the same time, Nam added, "Because a large volume will be concentrated in city centers within regulated zones over a short period, only by fully considering urban infrastructure carrying capacity—such as expanding roads—and accompanying realistic improvements to the residential environment can we maximize the supply effect without sparking controversy over haphazard development."
Lee Eun-hyung, a research fellow at the Korea Institute of Construction Policy, said, "As a result of policies that have emphasized owner-occupancy, the decline in rental listings has continued, so market demand for purchase-and-lease is sufficient."
From the perspective of private developers, the assessment is that by sharing unsold inventory risk, the government has expanded private developers' capacity to supply non-apartments. Nam said, "In particular, by improving the previous approach that allowed only whole-building purchases to permit 'partial purchases' of 20–50 units and by significantly easing the purchase threshold to 10 units in Seoul, the public sector is directly sharing the unsold inventory risk previously borne by private developers, which is positive," adding, "However, a precise guideline is needed to prevent future disputes over construction cost settlements under the groundbreak-first, verify-later approach."
Some also said that the increased budget burden and management challenges resulting from expanded purchase-and-lease supply must be considered. Lee said, "For purchase-and-lease, we must take into account the required budget," adding, "If an excessive target volume is set, we cannot rule out the possibility that executing agencies will be forced into unreasonable measures." He continued, "In addition to meeting target volumes, if partial purchases are allowed, post-purchase management burdens may increase."