Accelerating Pre-Subscription... But the Government's Housing Supply Roadmap Remains Unclear

Pre-sale Housing Units in 3rd New Towns and Taereung Increased from 9,000 to 60,000
High Possibility of Compensation Procedure Delays: "Optimistic Outlook Without Considering Variables"
Discovered Sites Face Obstacles Like Resident Opposition, Military Security, and Land Purification

In September 2018, the government announced a plan to build 1,300 housing units on the site of Seongdong Detention Center in Munjeong-dong, Songpa-gu, Seoul, as part of the 'Metropolitan Area Housing Supply Expansion Plan.' However, even after two years, construction has yet to begin on this site. Local residents strongly oppose the retention of some detention center facilities and the construction of rental housing. The project implementer, Seoul Housing and Communities Corporation (SH Corporation), expects that construction can start at the earliest next year.

There are criticisms that the housing supply schedule for major sites announced by the government through the 8.4 measures, including the 3rd phase new towns in the metropolitan area, is an optimistic forecast that does not consider variables in the project implementation process. Industry observers say the government's supply roadmap itself is a schedule "only possible when all obstacles are removed and the timeline is advanced as much as possible."

Pre-sale of 60,000 housing units to begin from the end of next year?

According to the government and industry on the 10th, the government's supply roadmap states that 60,000 housing units, which will come to the market through the expansion of existing supply such as the 3rd phase new towns and Taereung Golf Course or through the discovery of new sites, will be sequentially supplied through pre-sale from the second half of next year until 2022. Accordingly, the pre-sale volume, which was originally planned to supply 9,000 units only in the 3rd phase new towns, will increase more than sixfold to a total of 60,000 units. The government plans to receive pre-sale applications for 30,000 units from the third quarter of next year when the subscription system is established, and another 30,000 units in 2022.

Pre-sale occurs for some units 1 to 2 years before the main sale. The government expects that pre-sale units will take 3 to 4 years until move-in. Regular sales usually take place after the construction of the complex has started, so the expected move-in date is typically within 2 to 3 years. As 'panic buying' drives the market's upward trend, the government introduced pre-sale as a way to ease the anxiety of younger generations.

However, the industry points out that this is an outlook that does not consider the characteristics of land development projects, where various delays occur during the project procedures. Although the government plans to conduct pre-sales for the 3rd phase new towns next year and start move-ins from 2024, the possibility is low. It is explained that this is only possible when everything proceeds without any obstacles in a speed race.

Looking at past cases... obstacles such as compensation delays everywhere, average 6.3 years required

Typically, for new town development, the process goes through designation of land development districts, approval of development plans, approval of implementation plans, land development construction, and land and housing sales. Currently, for the 3rd phase new towns, after recent district designations, land compensation plans for Hanam Gyosan and Incheon Gyeyang were announced on the 7th. Compensation plans for Namyangju Wangsuk are scheduled to be announced this month, and for Goyang Changneung and Bucheon Daejang in the first half of next year.

The government and Korea Land and Housing Corporation (LH) plan to obtain development and implementation plan approvals next year, but there is a high possibility of delays during the compensation process. Considering the time required for land development, individual design, construction start, and building completion, move-in in 2024 is close to a situation where all schedules proceed sequentially. Especially for Hanam Gyosan district, there is a high possibility of cultural assets being discovered, such as the current site where treasures were unearthed, which could indefinitely delay project progress.

In fact, past major land development projects experienced setbacks due to compensation delays in many places. Even for 2nd phase new towns like Incheon Geomdan New Town and Paju Unjeong New Town, land compensation was delayed from several months to over a year, causing overall project schedule delays. In the case of Hwaseong Bongdam 2 district, compensation planned at the end of 2008 only began in 2010.

This is also confirmed by a survey by the Ministry of Land, Infrastructure and Transport. According to the ministry's urban development project status survey, the average project period from district designation to project completion was 6.3 years. Only 17.9% of projects were completed within 3 years. Projects taking 4 to 5 years accounted for 33.0%, and those taking 6 to 10 years were the most common at 36.7%. Projects taking 11 years or more accounted for 12.4%. Thus, few projects were completed in a short period as planned.

Newly discovered sites face numerous challenges such as resident opposition and military security

The newly discovered candidate sites for land development each face various significant challenges. Representative examples include Gwacheon Government Complex, Taereung Golf Course, and Yongsan Camp Kim site.

The idle land in front of Gwacheon Government Complex, where 4,000 housing units are to be supplied, faces strong opposition from local governments and residents. On the afternoon of the weekend, the 8th, more than 3,000 citizens (estimated by the organizers) gathered at Gwacheon Central Park for an opposition protest hosted by the 'Gwacheon Citizens' Square Defense Committee.' Mayor Kim Jong-cheon of Gwacheon also attended and expressed opposition to the development. Mayor Kim currently has set up a 'tent office' on the site and intends to work there until the government withdraws the plan.

Taereung Golf Course also faces opposition from nearby areas due to traffic congestion and green space destruction. Moreover, since the Korea Military Academy is adjacent, if high-rise apartments are built in the area, military security issues may arise as the interior of the military academy, a classified facility, could be clearly visible.

A rally opposing the destruction of the greenbelt at Taereung Golf Course, related to the large-scale housing supply plan in the Seoul metropolitan area, was held on the 9th in front of Lotte Department Store Nowon Branch in Seoul. Participants in the rally are holding placards and shouting slogans. Photo by Mun Ho-nam munonam@

The Camp Kim site, surprisingly included in this supply plan, is similar. Regarding the Camp Kim site, where 3,100 housing units are planned, Minister Kim said, "The US military has already relocated," and "Only bilateral negotiations on environmental issues remain, and once these are concluded, there will be no obstacles to early return," indicating that the supply plan will not be disrupted. However, Camp Kim was found to be unsuitable for immediate use as housing land in last year's Seoul city survey, where petroleum-based total hydrocarbon (TPH) concentrations were detected up to 258 times the standard (1.5 mg/L) at 8 out of 21 observation wells on the site, reaching 388.1 mg/L. Since most of the land must be excavated and replaced, it may take several years just for contamination cleanup.

An industry insider said, "Even if supply measures are announced, due to time lags, the immediate effect on stabilizing housing prices will inevitably be limited," and suggested, "Rather than the government pushing through excessive supply and losing trust, it is a priority to provide policy trust that supply will not be insufficient in the long term."