Outlined Housing Supply Measures: "Housing Price Stability vs Limited Effectiveness"

Real Estate Experts' Diagnosis of 5 Cases
Key Points: Floor Area Ratio Increase, Utilization of Idle Land, etc.

[Asia Economy Reporters Mun Je-won, Kim Yu-ri, Lim On-yu] The outline of the housing supply plan that the government will announce soon is taking shape. The core focuses on three key points: increasing floor area ratio in downtown Seoul, utilizing idle lands such as Taereung Golf Course, and expanding housing supply in the 3rd New Towns. In other words, the government plans to identify national and public lands around Seoul currently used for other purposes to build apartments, and supply new apartments in Seoul and the metropolitan area at the highest possible density to significantly increase supply.

While the government has committed to preserving the Greenbelt (development-restricted areas) and is searching for ways to expand supply as if squeezing a dry towel, experts are already expressing concerns. They explain that even if floor area ratios are raised and public lands are utilized, if a significant portion is used for rental housing without groundbreaking incentives, the market may once again reject it. Some voices warn of serious side effects such as deterioration of residential environments and damage to urban diversity.

According to government officials on the 27th, the Ministry of Economy and Finance, Ministry of Land, Infrastructure and Transport, and the Democratic Party of Korea plan to finalize and announce the housing supply measures as early as this week. The plan is expected to focus on ▲high-density development in downtown areas ▲increasing floor area ratios in the 3rd New Towns ▲discovering idle lands around cities ▲public redevelopment and reconstruction ▲utilization of vacant spaces in downtown areas, as outlined in the previous July 10 measures.

◆High-density development and downtown supply expansion expected, but 'rental' remains a variable= The government is reportedly considering raising the floor area ratio in quasi-residential zones among land use districts to increase housing supply in downtown Seoul. Currently, the legal maximum floor area ratio for quasi-residential zones is 500%, but Seoul City restricts it to below 400% through ordinances. Raising the floor area ratio and increasing the maximum number of floors for Seoul apartments to over 35 floors would increase supply volume.

Professor Kwon Dae-jung of Myongji University’s Department of Real Estate explains, "For reconstruction projects with deteriorated profitability, increasing the floor area ratio could be an opportunity," adding, "Projects without additional burden capacity can proceed." However, since the government plans to allocate a significant portion of the increased supply to rental housing, there are concerns that private sector participation may be limited.

Kim Deok-rye, head of the Housing Policy Research Office at the Korea Research Institute for Human Settlements, said, "For private lands, since the private sector decides whether to proceed based on profitability, clear incentives must be provided."

◆Public lands should increase the proportion of general sales for the middle class= The government is also seriously considering utilizing sites such as Taereung Golf Course in Nowon-gu, the former Korea Educational Development Institute site in Seocho-gu, and the Seoul Trade Exhibition Center (SETEC) site in Gangnam-gu. Ahn Myung-sook, head of the Real Estate Investment Support Center at Woori Bank, said, "Since these are lands previously owned by the government, the supply speed will be fast," calling it an "effective measure."

However, if a significant portion of these supplies is built mainly for newlyweds, low-income small households, or rental housing, the effect may be diminished. Yang Ji-young, CEO of Yang Ji-young R&C, advised, "Now is the time when housing supply desired by ordinary people is needed." The key is how much general sales supply for the middle class is included.

There are also criticisms that the overall urban planning framework must be considered. Kim Deok-rye said, "When finding supply measures, the urban planning and spatial functions of Seoul as an international city must also be considered," adding, "Especially SETEC plays an exhibition role in a major area of Seoul. While we understand the urgent need to find sites, we must not lose sight of the diverse functions the city should have."

◆Expanding supply in new towns and housing sites... limited effect on absorbing Seoul demand= The government has also decided to raise the floor area ratios for five 3rd New Towns: Namyangju Wangsuk, Hanam Gyosan, Incheon Gyeyang, Goyang Changneung, and Bucheon Daejang. Plans to increase supply in existing housing sites outside the new towns are also expected to be added. Economies of scale are possible, so the quantitative supply expansion effect is expected to be the greatest.

However, opinions differ on whether this will disperse the concentrated buying sentiment focused on Seoul. Ahn Myung-sook said, "Since the 3rd New Towns are already designated and underway, supply can be increased quickly and effectively."

Ham Young-jin, head of the Big Data Lab at Zigbang, also predicted, "Since the 3rd New Towns are not far from Seoul, if supply increases, there will be some dispersal effect on demand entering Seoul." On the other hand, Professor Kwon Dae-jung said, "It’s not that they won’t absorb any Seoul demand, but they won’t affect Seoul housing prices," adding, "Would people who can afford to buy houses in Seoul go to the 3rd New Towns?"

This content was produced with the assistance of AI translation services.