Whoever Becomes Seoul Mayor... Government Fears Losing Momentum for 'Public Development'

If Regulations Are Eased, Private Reconstruction and Redevelopment May Revitalize
Government-Led Public Maintenance Projects Could Lose Momentum
Government-Seoul City Cooperation Crucial... Election Results in Focus

On the 6th, one day before the April 7 by-elections, Park Young-sun, the Democratic Party candidate for Seoul mayor, and Oh Se-hoon, the People Power Party candidate for Seoul mayor, greeted citizens near Donghwa Duty Free Shop on Sejong-daero in Jongno-gu and in front of Sanggye Paik Hospital in Nowon-gu, respectively.
[Image source=Yonhap News]

[Asia Economy Reporter Moon Jiwon] As expectations spread that real estate regulations may be partially eased following the Seoul mayoral by-election, concerns have arisen that the momentum of the government-led ‘public-led’ development could weaken. Both ruling and opposition party candidates promised partial relaxation of private reconstruction and redevelopment regulations during the election campaign. If investigations into public officials’ real estate speculation accelerate later, distrust toward public development could further increase.

According to sources inside and outside the government on the 7th, the Ministry of Land, Infrastructure and Transport selected 21 candidate sites last month for the first pilot project of the ‘Urban Public Housing Complex Development Project’ and plans to proceed with the selection process for public-led maintenance projects and the second round of new housing site candidates starting this month. These are all core policies included in the 2·4 measures, focusing on increasing housing supply led by the public sector rather than the private sector.

While opinions suggest that the Urban Public Housing Complex Development Project and public-led maintenance projects have attracted more interest than expected due to a surge in early applications, there remain significant doubts in the market about their smooth implementation. In particular, many analyses indicate that the Seoul mayoral by-election could hamper progress. Both Park Young-sun of the Democratic Party and Oh Se-hoon of the People Power Party flooded the campaign with market-friendly real estate pledges to win public favor.

Although Park, as a ruling party candidate, faces some constraints in easing regulations, she has also mentioned the necessity of private development, suggesting that private reconstruction and redevelopment will likely be more active regardless of who wins. The government promotes public-led maintenance projects as ‘better than private development,’ but if private regulations are eased, the driving force behind these projects will inevitably weaken.

Especially if the opposition party wins, private development is expected to gain more momentum, particularly in the Gangnam area. Major reconstruction complexes such as Apgujeong-dong in Gangnam-gu are already seeing apartment prices rise amid development expectations. Public development promoted by the government requires cooperation with the Seoul Metropolitan Government, and depending on circumstances, increased confusion could delay project progress.

The angry real estate sentiment triggered by the land speculation of Korea Land and Housing Corporation (LH) employees in new towns is also an obstacle. Many experts point out, "It is still unknown how much consent from residents will be obtained, and since trust in the public sector has significantly declined due to the LH scandal, uncertainty is high."

However, since the remaining term of the Seoul mayor is only about one year and the Ministry of Land, Infrastructure and Transport’s determination to push forward the 2·4 measures is strong, there is also hope that public development could serve as a foothold for stabilizing housing prices. Yoon Sung-won, the first vice minister of the Ministry of Land, Infrastructure and Transport, said at last week’s ‘1st Weekly Housing Supply Briefing,’ "The benefits returning to the local areas from this supply plan are enormous," adding, "If we properly explain the effects, we expect it to proceed smoothly."