"What Does the 'Special Measures' Contain... The 'Secret Solution' for Stabilizing House Prices"

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[Asia Economy Reporter Moon Jae-won] The "drastic supply measures" mentioned by President Moon Jae-in at the New Year's press conference are expected to be announced as early as next week. Analysts suggest that, in addition to high-density development around transit stations and public reconstruction, bold new housing site discoveries and a strong development profit recovery system will also be included.

According to sources inside and outside the government on the 30th, the Ministry of Land, Infrastructure and Transport, the Ministry of Economy and Finance, and the Seoul Metropolitan Government plan to finalize and announce housing supply measures for metropolitan areas in early next month. The measures will mainly focus on public redevelopment and public reconstruction with increased public participation, high-density development around transit stations, and zoning changes in semi-industrial areas. In particular, the plan is to supply high-quality apartments in good locations through transit station development for newlyweds, young people, and other one- to two-person households.

Minister of Land, Infrastructure and Transport Byeon Chang-heum, who has advocated the necessity of scholar facilities, is expected to fully introduce so-called "public owner-occupied housing," such as land leasehold housing and repurchase condition housing. Land leasehold means that the public retains land ownership while only selling the building to lower the sale price, and repurchase condition housing involves the homeowner selling the house back to a public institution later to limit capital gains. The government intends to prevent profits from development from concentrating in one place through these methods.

Some quarters also mention the possibility of partially lifting development restrictions (Greenbelt) and designating "mini new town-level" housing site districts. President Moon raised market expectations by mentioning "bold development of new housing sites" at the actual New Year's press conference. Experts view areas such as Gwangmyeong and Siheung districts, which are larger than Ilsan New Town (15.74 million square meters), as strong candidates.

Areas such as Hwajeon-dong in Deogyang-gu, Goyang, and Gochon in Gimpo are also mentioned as possible housing site districts, but there is also a forecast that new mini new town-level developments will be difficult as the 3rd New Town is now being actively promoted. This is because new transportation measures need to be established, and strong opposition from residents of previous new towns is expected, which is also a burden.

Industry insiders point out that the "drastic measures" may also have limited effectiveness. They explain that simply increasing supply somewhat will not be enough to handle the current buying demand in Seoul and other metropolitan areas, given that the government has stated it will "maintain existing speculative suppression policies."

Professor Lim Jae-man of the Department of Real Estate at Sejong University said, "If development is concentrated in the metropolitan area, the population will gather even more in Seoul, not just breaking balanced development but turning Seoul into a black hole that sucks in the entire national population," adding, "Without measures to prevent buying demand from concentrating in Seoul and other metropolitan areas, increasing housing supply alone cannot solve the problem."

In fact, despite the government's signal to expand supply, apartment price growth rates in the metropolitan area are still soaring. According to the weekly apartment price trend survey for the fourth week of January released by the Korea Real Estate Board, metropolitan area apartment prices rose by 0.33% this week, an increase from 0.31% the previous week. Last week marked the highest rise in 8 years and 8 months since the Korea Real Estate Board began compiling statistics, and the highest rate was broken again in just one week.

In the Korea Real Estate Board's "Weekly Apartment Market Trends" statistics, the apartment sales and supply-demand index in Gyeonggi Province recorded 124.3, the highest since the related statistics began in July 2012. An industry official explained, "Despite the government's announcement of supply measures, the market does not have enough expectation that housing prices will stabilize," adding, "Depending on the content of the measures, apartment prices may become even more unstable."

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