[Press Conference] "Increasing Supply through Public Redevelopment"... Experts Say "Limited Market Impact"

Expressed 'Supply Expansion' Stance... but Speculation Suppression Policy Remains Unchanged

[Image source=Yonhap News]

[Asia Economy Reporters Inho Yoo, Jieun Lee, Jinyoung Jeon] President Moon Jae-in’s announcement at the New Year press conference to expand supply beyond market expectations through public redevelopment, station-area development, and new housing site development stems from the recognition that there is a supply shortage due to excessive housing demand. This marks a clear shift from last year’s New Year press conference, where the emphasis was on ‘suppressing speculation.’ However, experts analyzed that the impact on the market would not be significant, citing that the government still maintains a stance of suppressing speculation and that the timing of emphasizing supply expansion is too late.

At the New Year press conference on the morning of the 18th, President Moon indicated supply expansion, stating, "Despite the population decline last year, the number of households increased by 610,000, causing demand to exceed the predicted supply volume." Regarding the reason for maintaining ‘speculation suppression’ as the main policy direction, he admitted, "Previous governments increased housing supply, so there was a judgment that if real estate speculation was well controlled, there would be sufficient supply. Therefore, we focused on speculation suppression, but we failed to stabilize the market."

President Moon cited abundant liquidity and an increase in the number of households as causes of rising real estate prices. He analyzed, "As in other countries, abundant market liquidity has led funds to flow into the real estate market. The reason for the increase in the number of households needs to be analyzed, but the supply shortage caused by excess demand has fueled the rise in real estate prices."

Nevertheless, the existing stance on speculation suppression will be maintained. President Moon said, "While maintaining the existing speculation suppression stance, we plan to prepare extraordinary measures related to real estate supply before Lunar New Year. We will increase public sector participation in the metropolitan area, especially Seoul, and expand supply far beyond market expectations through bold development of public redevelopment, station-area development, and new housing sites by strengthening incentives and shortening procedures." This suggests an active move toward supply expansion following his New Year address, in which he expressed regret about real estate policy. This stance is clearly different from the one-year-ago press conference where he confidently stated, "The government’s will to curb speculation and stabilize real estate prices is firm, and we will continuously introduce stronger measures." It also indicates a serious recognition of the current real estate situation.

Despite President Moon’s shift in tone, experts responded that the impact on the real estate market would not be significant. This is because the diagnosis of the real estate market as being affected by ‘low interest rates due to liquidity and household segmentation issues’ remains unchanged, and no new alternatives have been presented regarding housing supply measures. In other words, the policy direction of ‘maintaining speculation suppression while strengthening supply measures’ has not changed at all. Eunhyung Lee of the Korea Institute of Construction Policy said, "The government continues to avoid responsibility while maintaining the existing regulatory stance. Although they say they will prepare extraordinary supply measures before Lunar New Year, most of these are already mentioned measures, so it is difficult to expect significant policy effectiveness."

[Image source=Yonhap News]

Some voices express a negative view that even if supply measures are announced before Lunar New Year, it will be difficult to affect the real estate market, and instability will continue. Professor Daedjung Kwon of Myongji University pointed out, "Because the supply measures themselves are very late, even if the government introduces extraordinary supply measures as President Moon said, the real estate market will inevitably remain unstable until those measures translate into actual housing units. To calm the unstable market, multi-homeowners should be allowed to sell their houses, but since that aspect is missing and regulations will continue, it will be difficult to help stabilize the real estate market."