[Inside Chodong] Rehashed and Recycled... Familiar 9/26 Supply Plan

“It seems similar content was announced before, and it looks like there is no substance...” This was my thought after reviewing the government's housing supply plan announced on the 26th of last month.

The 21-page document titled ‘Measures to Revitalize Housing Supply for National Housing Stability’ described various policies to be pursued in the future, but there was nothing particularly eye-catching.

The main points appeared to be ▲an additional supply of 55,000 public housing units (30,000 units in the 3rd New Town, 20,000 units in new housing sites, 5,000 units converted from private sector supply to public) ▲expansion and support of real estate project financing (PF) guarantees by 10 trillion won.

However, these contents felt very familiar. Reviewing my memory and previous articles, I found that it was similar to the 8.16 measures announced last year. In particular, the expansion of 30,000 units in the 3rd New Town, which was highlighted at the forefront of this supply plan, was also announced in the 8.16 measures last year by increasing the floor area ratio near stations to boost supply, giving the impression that only the numbers were added.

The additional 20,000 units in new housing sites also followed the 8.16 measures last year. At that time, the government announced a plan for 150,000 new housing sites and said it would select 65,000 new housing sites in the second half of this year. However, in the economic policy direction announcement in July, the timing was adjusted to the first half of 2024, and this was reversed back to the original position by increasing it by 20,000 units.

The expansion and support of PF guarantees amounting to 10 trillion won raised concerns. After the PF default incident triggered by Legoland in September last year, the government increased the PF guarantee scale to 15 trillion won. However, in the market, the PF guarantee expansion and support system did not function properly. According to the ‘Real Estate PF Guarantee Handling Status’ data submitted by Kim Byung-wook, a member of the Democratic Party of Korea, from the Housing and Urban Guarantee Corporation (HUG), as of August, the actual real estate PF guarantee performance was only 3.98 trillion won. This is just 26.5% of the 15 trillion won support target set by the government when it was announced in October last year.

Especially, the problematic areas for PF financing are local projects. Unlike the metropolitan area, local regions are still experiencing real estate stagnation, and the private sector is reluctant to supply. In a situation where demand is not supported, simply increasing PF guarantees to expand supply raises doubts about whether it will be effective. Moreover, with the prolonged high interest rates in the US causing soaring interest and exchange rates, there are concerns that expanding PF loans could lead to defaults.

Of course, it is positive that the government has presented a supply plan amid a foreseeable supply drought. However, the problem is that it is too formalistic. Even looking at the additional public housing supply, it did not significantly deviate from the ‘rehashed’ previously announced measures. I even wondered if it was necessary to rush to announce such a sloppy plan before Chuseok. Considering that real estate measures greatly influence public sentiment at the holiday dinner table, there is also a regret that the timing of this announcement was approached too politically.

Policy should be approached with cold economic logic. Clumsy or unfocused real estate populism measures only undermine the credibility of the policy. I hope that even now, the government carefully identifies what can be implemented immediately, what cannot, what is urgent, and what requires time, and presents a proper supply plan.

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