Establishment of Unsold PF Guarantees and Early Easing of Reconstruction Regulations... Guiding a Soft Landing for Real Estate

Normalization of Registered Rental Housing Operators
Abolition of Residency Requirements for Non-Sequential Subscription
Announcement of Real Estate Market Normalization Measures

Photo by Asia Economy

As interest rate hikes and housing price declines accelerate, raising concerns about a hard landing in the real estate market, the government is establishing a 5 trillion won project financing (PF) loan guarantee for unsold housing. Additionally, measures to ease reconstruction safety inspection regulations and normalize the housing registration rental business will be prepared early within the year. Opportunities for subscription will also be expanded, including the abolition of residency requirements for non-priority subscription.

The Ministry of Land, Infrastructure and Transport announced on the 10th, during a meeting of real estate-related ministers, that it will implement these real estate market normalization measures.

◆Spread of Unsold Housing Fear... 5 Trillion Won PF Loan Guarantee through HUG

First, as concerns about the market due to unsold housing are spreading, a 5 trillion won PF loan guarantee product for unsold housing will be newly established through the Housing and Urban Guarantee Corporation (HUG).

Currently, there is no separate guarantee product for unsold housing before completion, which causes financial difficulties for construction companies. Going forward, HUG will support guarantees so that PF loans can be obtained for unsold projects before completion. However, construction companies must accompany self-help efforts to resolve unsold housing, such as price discounts.

Also, to prevent excessive contraction of the housing supply base due to unsold housing, the existing PF loan guarantee issuance by HUG and the Housing Finance Corporation (HF) will be expanded up to 10 trillion won, and interest rate and screening requirements will be eased.

◆Early Preparation of Reconstruction Safety Inspection Standard Easing and Registration Rental Business Normalization Measures

Along with this, the reconstruction safety inspection standards, which were scheduled to be announced within the year, will be disclosed earlier in early December.

The current structural safety weight of 50% will be lowered to 30-40%, and the mandatory public institution adequacy inspection currently required for D-grade classifications in detailed safety inspections will be limited to cases where local governments request it.

The improvement plan will be announced in early next month and is planned to be implemented as early as January next year.

A normalization plan for the housing registration rental business will also be prepared within the year.

Currently, the registration rental business system has reduced benefits since 2020, allowing long-term (10-year) registration rental business only for detached and multi-family houses excluding apartments. However, considering the market downturn, the government plans to prepare a reasonable reform plan within the year.

Previously, only cases where a REIT owned more than 50% of the shares of a real estate corporation were recognized as real estate investment shares, but going forward, shares will be recognized as real estate even if a REIT holds 20% or more of the real estate corporation’s shares.

◆Abolition of Mandatory Pre-Subscription for Public Land and Expansion of Non-Priority Subscription Opportunities

Due to the recent slump in the subscription market and to disperse supply volumes, mandatory pre-subscription for public land to be sold in the future will be abolished.

Currently, pre-subscription is mandatory for public land to ensure early housing supply, causing a problem where demand decreases while sales concentrate within 2-3 years.

The government will also relax the pre-subscription period for already sold land from 6 months to within 2 years.

Accordingly, private supply volumes will be adjusted from 74,000 units to about 15,000 units by 2024, and public supply by LH and others will be reduced from 24,000 units to about 11,000 units by next year.

In non-priority subscriptions, residency requirements will be abolished to expand subscription eligibility. Currently, to prevent overheating in the subscription market, non-priority subscription applications in regulated areas are limited to non-homeowners residing in the relevant city or county. The residency requirement will be removed, and the range of preliminary winners will be increased from the current 40% of the recruitment number to over 500%.

Kwun Hyuk-jin, Director of the Housing and Land Office at the Ministry of Land, Infrastructure and Transport, said, "We will implement key tasks as quickly as possible to prevent contraction of the housing supply base and protect low-income and actual demanders."

He added, "We will closely monitor real-time trends in low-income finance, the construction industry, and capital markets, and if additional measures related to housing supply and low-income housing stability are necessary, we plan to take timely action according to prepared step-by-step response plans."