[7·10 Real Estate Measures] Increasing Housing Supply in 3rd New Towns

[Asia Economy Reporter Yoo In-ho] The government has outlined the broad framework of its supply expansion plan alongside the strengthening of tax burdens on multi-homeowners.

First, the floor area ratio of the 3rd phase new towns will be increased to expand the number of housing units constructed. Currently, the planned housing construction volume in the five 3rd phase new towns, including Namyangju Wangsuk and Hanam Gyosan, is 300,000 units. Even a 10% increase in construction volume would result in an additional supply of 30,000 units.

Along with this, urban planning regulations for high-density development in city centers will be significantly revised. Measures such as raising the allowable floor area ratio in commercial or quasi-residential areas or increasing the housing construction ratio are being discussed.

The government has also decided to actively pursue the discovery of new sites, including idle land around cities and national facility sites within urban areas.

There is also consideration of remodeling commercial buildings and offices in downtown Seoul to increase the supply of single-person housing. According to the Korea Real Estate Board, the office vacancy rate in Seoul for the first quarter of this year was 8.6%. Gangnam recorded 6.7%, Yeouido 9.9%, and Yeongdeungpo 16.4%. The average vacancy rate for medium to large commercial buildings in Seoul was 7.9%, up 1 percentage point from 6.9% in the fourth quarter of last year. Under this plan, the supply from utilizing vacant commercial buildings in the city center is expected to increase from the existing 8,000 units to over 10,000 units.

Additionally, when projects are promoted through public redevelopment and reconstruction methods, plans will be made to supply public rental housing and sale apartments for youth and newlyweds by easing regulations.

To this end, the government will form a 'Housing Supply Expansion Task Force' chaired by Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki. Deputy Prime Minister Hong plans to hold full authority over land supply in the metropolitan area, including Seoul, and prepare supply measures. Separately, the Ministry of Land, Infrastructure and Transport has formed a working planning team led by First Vice Minister Park Seon-ho to prepare detailed supply plans.

However, securing sites within downtown Seoul, which holds the key to expanding housing supply for actual demanders, is not easy. Currently, it is difficult to secure additional idle land in downtown Seoul beyond the existing volume.

It is challenging to find idle land within Seoul capable of large-scale supply that would send a signal to the market. Moreover, among the 47 idle land projects being promoted as part of the previously promised supply of 80,000 units, only 13 sites have entered the project implementation stage (with 5 under construction), indicating sluggish progress.

Although not mentioned in the measures, the release of greenbelt areas within Seoul is also a likely option. As of January, the greenbelt area within Seoul is 149.13㎢. The ruling party, the Democratic Party of Korea, is in consultation with the Ministry of Land, Infrastructure and Transport, the Ministry of the Interior and Safety, Seoul City, and other government and local authorities regarding housing supply expansion plans. Considering the effect of supply expansion, the greenbelt areas in Gangnam and Seocho districts and other parts of the Gangnam area are likely to be the top priority for release.

However, as a compromise, Seoul City is considering purchasing and developing some of the long-term unexecuted urban parks, which were invalidated on the 1st of this month, instead of releasing greenbelt areas. Additionally, the city is also reviewing a method of high-density development in downtown areas by purchasing some sites where redevelopment was canceled and enabling redevelopment to supply public rental housing.