[Choi Jun-young's Urban Pilgrimage] Presidential Election and Housing·Real Estate Challenges

The Frustration of 'Byeorakgeoji' Homeless People, Sharp Increase in Tax Burden for Single-Homeowners
Housing Market Reshaped into a Market of Desire... Expansion of Housing Supply, Financial Support, and Transportation Networks
First Task Is to Give the Public Confidence Like the Ambitious Promises During the Candidacy Period

The fiercely contested 20th presidential election has come to an end. Although there were many conflicts and confrontations during the election process, the candidates' pledges were surprisingly similar in many respects.

Both candidates shared similar recognition of the problems facing the Republic of Korea, but their approaches to solving them differed slightly, as did their judgments on which means to employ. Initially, real estate and housing issues were expected to be the core topics of this election, but since both sides had largely similar problem recognition and solutions, these issues did not emerge as key topics as anticipated.

The real estate market, which surged over the past five years, coupled with policies responding to it, is remembered as a difficult and painful period for everyone. The homeless felt the despair of rapidly widening wealth gaps, symbolized by the term "byeorakgeoji" (sudden pauper). Those with one home sighed in relief but expressed frustration over the rising tax burden and the difficulty of relocating elsewhere. Multi-homeowners faced a tough situation where selling their properties was difficult due to high capital gains taxes, yet holding onto them was also challenging. The elected leader faces the task of resolving these widespread grievances.

Looking back, the government's emphasis on large-scale public housing supply, based on the principle that "housing is a place to live," focusing on providing stable living conditions, was somewhat reasonable and rational. However, as economic changes coincided with an increased desire among demand groups to secure assets, surpassing the demand for stability, a public housing-centered approach was deemed inadequate. The global trend of relaxed fiscal and monetary policies in response to the COVID-19 shock led to a rapid rise in asset prices, strengthening the desire to hold assets such as real estate and stocks more than ever. On the other hand, the ongoing normalization of dual-income households and preferences for proximity to workplaces, along with the routine use of various shopping and convenience facilities, combined with changes in the real estate market, transformed the housing market into one driven primarily by desire.

Both candidates proposed policies to address these issues summarized as large-scale new housing supply, expanded financial support, and transportation network expansion. They plan to supply 2.5 to 3 million housing units, with a portion offered to young people at affordable prices, and support first-time homebuyers by relaxing the loan-to-value ratio (LTV) to 80-90% to facilitate homeownership.

Yoon Seok-yeol, the president-elect of the 20th Republic of Korea, is delivering a greeting at the People Power Party's campaign headquarters disbandment ceremony held at the National Assembly Library on the 10th. Photo by the National Assembly Press Photographers Group

The plan aims to stabilize the housing market by supplying a large volume of new homes exceeding demand and to alleviate social conflicts by providing asset acquisition opportunities to new entrants with limited capital mobilization capacity. Additionally, both candidates share the goal of expanding metropolitan transportation networks, represented by the GTX series, to improve accessibility to urban centers where workplaces are concentrated.

While these ambitious pledges are clear, many challenges to their realization exist. Everyone knows that there is a shortage of land for large-scale housing supply in Seoul and the metropolitan area, making future supply expansion uncertain. Reconstruction and redevelopment require a significant amount of time, and rebuilding the aging first-generation new towns is also very difficult in the short term due to conflicts and disputes arising from stakeholder adjustments and large-scale planning. Increasing floor area ratios to activate reconstruction is limited by considerations such as sunlight rights.

Similarly, easing regulations on mortgage loans faces challenges. Setting the loan limit for first-time homebuyers is a difficult task. In Seoul, the median apartment price is about 1.05 billion KRW, so allowing an 80% LTV means permitting loans of around 800 million KRW. Considering that Korea already has the highest household debt-to-GDP ratio among OECD countries, making such a decision is not easy. Conversely, if the scope of eligible homes is set too narrowly, such as only allowing loans for homes under 500 million KRW, backlash over effectiveness is inevitable. Balancing financial market stability with the demands of the younger generation is a challenging task.

Expanding railway transportation networks, including the GTX connecting various parts of the metropolitan area and Seoul, is a priority task linked to reducing transportation demand in response to climate change. However, considering demand and economic feasibility, the regions that can reasonably be targeted are limited. Installing such networks in many areas beyond rational resource allocation requires political decisions and consensus, which is not simple. Large-scale transportation investments concentrated in Seoul and the metropolitan area may accelerate metropolitan concentration, inevitably conflicting with other goals such as balanced regional development.

Victory is sweet and joyful, but the moment is brief. The elected leader faces a painful and agonizing time over the next five years with numerous challenges to solve. It will be impossible to satisfy everyone. However, it is possible to ensure that no one feels ignored or blamed as the cause of problems. The housing and real estate market is influenced as much by emotional factors as by the laws of supply and demand. Recognizing the complex realities surrounding the housing market and providing assurance that the leader will move forward together with the market will be the first task of the elected leader.

Legal Expert, Yulchon LLC

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