Government Introduces Measures to Increase Housing Supply
View of city apartments from Namsan Mountain in Seoul. Photo: News1, Koo Yun-seong
The government has unveiled the ‘Supply Measures 26 September’ aiming to address the housing supply shortage. The key focus of these measures is to boost public supply by increasing the floor area ratio and stimulate private supply by deregulating and expanding project finance (PF) guarantees.
Public Supply Expansion and Delivery Acceleration
Under the plan, the government will increase the floor area ratio to accommodate more than 30,000 households in the new 3rd city. Additionally, they will allocate an extra 20,000 households on public housing land and convert 5,000 unsold apartment complexes into public housing land, resulting in a total of 55,000 additional households. The delivery period will also be accelerated through a fast track process.
Private Supply Promotion and Temporary Relaxation of Restrictions
In order to stimulate private supply, the government will temporarily relax restrictions on the resale of public housing land for one year. They will also provide incentives for land supply for public housing, expediting the licensing process. Furthermore, the PF guarantee size will be expanded from 15 trillion won to 25 trillion won, and the restructuring fund for private financial companies will be increased from 1 trillion won to 2 trillion won, facilitating swift business restructuring amid construction delays. To promote short-term supply, regulations on non-apartments such as offices and hotels will be relaxed.
Experts Express Mixed Opinions
When asked about the ‘September 26 Delivery Measures’, real estate experts had varying opinions. While some praised the government’s commitment to supply, others questioned the effectiveness of the measures.
Positive Outlook on Resolving Housing Supply Contraction
Ham Young-jin, head of Zigbang Big Data Lab, acknowledged that the government’s active approach will alleviate housing supply contraction caused by subscription polarization and rising prices. He also emphasized the need for tailored support for all types of PF businesses to provide liquidity to construction companies. Rap Manager Ham noted the acceleration of high-quality housing land supply with the relaxation of restrictions on the resale of public housing land. However, he expressed concerns about the one-year timeframe and the potential for side contracts or swarming offers between businesses.
Real Estate R114 senior researcher Ji-hae Yoon identified the measures that could have short-term effects, such as securing additional volume in the new 3rd city and shortening public project procedures. He also emphasized the necessity of expanding PF loan guarantees and support for intermediate payment loans in the private sector.
Long-Term Supply Expansion Challenges
Experts highlighted the need for discussions and system changes in areas such as regulatory normalization, improvement of maintenance project procedures, and regulation improvements for flats. Yoon further emphasized the importance of utilizing the 330,000 approved but undeveloped homes for short-term supply expansion, with the private sector assuming responsibility for 80% of the total supply.
Song In-ho, director of the KDI Economic Information Center, evaluated the measures as encouraging public-oriented supply, providing a medium to long-term plan for the housing market’s future volatility.
Concerns Regarding Effectiveness and Price Increases
Despite positive remarks, some experts questioned the effectiveness of the measures. Professor Seo Jin-hyeong expressed doubt about their impact, noting the unfavorable market situation for private supply. Song Seung-hyun, CEO of Cities and Economy, mentioned that the market may take time to adjust to already high land and material prices. CEO Ko Jun-seok highlighted the need for tax breaks and support for multiple home sellers in addition to new supply. Concerns were also raised about the potential increase in selling prices.
Overall, while the government’s measures were praised for addressing housing supply contraction, doubts remained about their effectiveness and the need for additional policies to stimulate market activity.
Kim Myeong-seop, News1 Reporter
Contact: dkim@newyddion1.kr
View of city apartments from Namsan Mountain in Seoul. 2023.9.18/News1 © News1 Reporter Koo Yun-seong
The core of the ‘Supply Measures 26 September’ introduced by the government on the 26th is to increase public supply by raising the floor area ratio and revive private supply by deregulating and expanding project finance (PF) guarantees.
Specifically, in public supply, more than 30,000 households will be expanded in the new 3rd city by increasing the floor area ratio. In addition, an additional 20,000 households will be found on public housing land, and 5,000 households among unsold apartment complexes will be converted to public housing land, supplying a total of 55,000 additional households. The delivery period is also accelerated through fast track.
In order to expand private supply, restrictions on the resale of public housing land will be temporarily relaxed for one year, and incentives will be provided for the supply of land for public housing when licensing is accelerated. The size of the PF guarantee will also be expanded from 15 trillion won to 25 trillion won, and the restructuring fund focused on private financial companies will be increased from 1 trillion won to 2 trillion won to implement business restructuring quickly with construction delays. In addition, regulations on non-apartments such as offices and hotels will be relaxed in order to promote short-term supply.
30 days <뉴스1>When we asked six real estate experts about the ‘September 26 Delivery Measures’, they gave mixed reviews. There was a positive evaluation in the sense that it shows the government’s commitment to supply, but there were also points that there were doubts about its effectiveness.
◇ The government’s expression of its will to resolve the contraction in housing supply is positive.
Ham Young-jin, head of Zigbang Big Data Lab, said, “The government’s expression of active supply will solve the contraction of the housing supply due to the polarization of subscriptions in the sales market, rising prices, and positively cooling PF loans,” adding, “We will provides liquidity to construction companies and provides tailored support for all types of PF business.” “I believe that supplementary measures have been prepared to prevent the spread of insolvency, etc.,” he said.
Rap Manager Ham said, “With the relaxation of restrictions on the resale of public housing land, the pace of supply of high-quality housing land with demand is expected to accelerate,” adding, “There is a high probability that operating and construction companies with financial strength and will the will to pursue projects buying valuable land for public housing and start supplying housing.” “It looks high,” he said.
He added, “However, it is relaxed to a period of one year, and it is only allowed to be resold below the initial price, so it seems that there is a need to monitor concerns about side contracts or swarming offers between businesses. ”
Ji-hae Yoon, senior researcher at Real Estate R114, also said, “Among the measures, it seems that the measures that can have a short-term effect include securing additional volume in the 3rd new city and shortening public project procedures in the public. sector,” and added, “In the private sector, there is a need to expand PF loan guarantees and support for intermediate payment loans.” “Including financial aid policies,” he explained.
It was analyzed that a supply effect can be expected in a rather long period as discussions are needed in the National Assembly on areas that require system changes, such as normalizing regulations, improving maintenance project procedures, and improving regulations – flats.
Senior Researcher Yoon continued, “The 330,000 homes that have not been able to start construction even after receiving permits need to be actively used as a major axis for short-term supply expansion,” adding, “To achieve this, 80% of the total supply (based on apartment sales volume in 2022) He added, “It is essential to expand the role of the private sector in taking responsibility.”
Song In-ho, director of the KDI Economic Information Center, said, “This measure is evaluated as a measure to encourage public-oriented supply,” and “It shows the government’s will to supply flexibly in advance, bearing in mind the volatility of the housing market two to three years from now, and providing a medium to long term plan.” “I think it is meaningful that measures and signals have been given to the enemy,” he said.
Chu Kyung-ho, the Deputy Prime Minister and Minister of Strategy and Finance, announces plans to revive the housing supply at the Seoul Government Complex on Sejong-daero, Jongno-gu, Seoul on the afternoon of the 26th. From left, Financial Services Commission Chairman Kim Joo-hyun, Deputy Prime Minister Chu, and Land, Infrastructure and Transport Minister Hee-ryong won. 2023.9.26/News1 © News1 Reporter Kim Myeong-seop
◇ Some questions were raised about its effectiveness… Concerns about price increases
There were many experts who noted its effectiveness. Seo Jin-hyeong, professor of MD Business at Kyungin Women’s University, said, “It is good to promise to ensure uninterrupted supply to the public sector, but it is doubtful how effective it will be. In the private sector, supply must be guaranteed when profitability and marketability are guaranteed, but the current market situation is not good.”
He said, “Expansion of PF loan guarantees could also prevent the bankruptcy crisis of construction companies, but I have doubts about its effectiveness as it is seen as urinating on frozen ground.” He added, “From the consumer’s point of view, what they really want. are two things: loosening financial loan regulations and tax relief, but these are not there.” “He added.
Song Seung-hyun, CEO of Cities and Economy, also said, “Even if the money supply increases and incentives are provided for small houses, it seems that it will take some time the market to adjust to the already high land and materials prices. costs.” He added, “The general real estate market must be revived in order for suppliers to be active.” “I can do business,” he said.
Ko Jun-seok, CEO of JEDU Investment Advisory, also said, “This measure may have a positive psychological effect on the market, but I don’t think the practical effect will be significant. Supply is possible not only through new supply but also when multiple home owners put their property on the market, so passing on tax breaks, etc.
There were also concerns about the increase in selling prices. Senior researcher Jihae Yoon said, “Measures have been taken to increase the flexibility of private construction costs, but this has the side effect of spreading the increase in new construction prices at the same time. For this reason, it is necessary to ensure as much inventory public as possible under the selling price cap system, which controls the level of selling price increases.” He suggested.
© News1 Designer Chohee Kim
dkim@newyddion1.kr
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