Value context and insight. lkm@koreatimes.co.kr
Experts raise questions over gov't home supply plan
Minister of Land, Infrastructure and Transport Byeon Chang-heum speaks during a press briefing at the Seoul Government Complex in Gwanghwamun, Thursday. Courtesy of Ministry of Land, Infrastructure and Transport
By Lee Kyung-min
Gov't to supply 836,000 new homes nationwide for next five years
By Lee Kyung-min
The government plans to supply 836,000 houses nationwide by 2025 through state-run redevelopment and reconstruction, as part of continued efforts to stabilize housing prices that have nearly doubled over the past few years.
This is a notable change from the two dozen previous “botched” real estate policies, defined by demand control including a heavier tax on multiple homeowners and tighter lending rules for mortgage seekers among other measures to curb property speculation.
Experts say the long-overdue supply-bolstering measures are welcome. Yet concerns remain since key details were left unclear including where the homes will be built and how to resolve compensation or profit-sharing issues with landowners.
According to the measures unveiled by the Ministry of Land Infrastructure and Transport, Thursday, 616,000 houses will be built in Seoul, and the surrounding Gyeonggi Province and nearby Incheon.
About half, or 320,000, will be supplied in Seoul, about three times the total number of homes in Bundang, Gyeonggi Province, and similar to 341,000 apartments in Gangnam, southern Seoul.
Those who have been without homes for at least three years will be eligible to apply for a state-run, pre-conditioned lottery-like process to receive a home, a measure the ministry says will lower the bar for 30- and 40-somethings to “win.”
The chance of winning becomes higher for those with higher eligibility scores calculated on a variety of conditions including the time not owning a home, how long a related bank account has been open, marital status and the number of children among others.
“For the past three years, it was hard for middle-aged Koreans to own a home through the state-run process, mostly because the supply volume was limited in Seoul,” Land Minister Byeon Chang-heum said during a press briefing at the Seoul Government Complex in Gwanghwamun. “People in their 30s and 40s will be given a chance to have a home even when their eligibility scores are low.”
Under the new measures, construction rules will be eased through the increase of floor area ratios, measured by building area divided by lot area, to up to 120 percent of the current legally allowed maximum. This will allow for the speeding up of redevelopment projects for aging apartments. The current height restriction limit for apartment blocks will be also raised.
The government said the maximum period needed for reconstruction plan approval will be shortened to as little as five years from the current 13, following the government's removal of red tape.
Myongji University real estate professor Kwon Dae-jung said the government has yet to announce where the development and reconstruction will take place. “Also lacking is how to reach an agreement with the owners of land on which the government plans to build homes, a crucial detail that could derail the whole project,” he said.
Seoul National University economist Kim So-young said the quality of the homes will determine the success of the measure.
If the supplied homes are low-quality, it will not help price the stabilization of privately built apartments, he said. This is because homes used for property speculation are of decent quality, and are not small ones long criticized for poor maintenance.
“If the policy priority is to build more homes for people to live in, then the policy is not a complete failure. But if it is for price stabilization, the focus is way off,” he added.
Kwon said soaring jeonse and monthly rent will be another major concern the government should not neglect. Unique to Korea jeonse is a home renting system whereby tenants pay a lump sum refundable deposit instead of monthly rent.
“Once the areas of development and reconstruction are announced, home prices there will spike, and that of jeonse and monthly rent will rise accordingly. This will become a serious housing issue for many, and so government measures in the months to come should address how best to resolve these concerns,” he said.