Daegu City with Increasing Unsold Homes Requests Transfer of Authority for "Adjustment Area Designation and Cancellation" to Local Government

"Ministry of Land Fails to Respond Timely"

36,000 Housing Units to be Delivered by Year-End

On the 4th, Daegu City requested the Ministry of Land, Infrastructure and Transport to transfer the authority over housing policy regulations, such as the designation and cancellation of adjusted target areas, to local governments in order to minimize the ripple effects on the regional economy caused by the increase in unsold houses, the sharp rise in interest rates, and inflation-induced housing market contraction.

As of the end of February 2023, the number of unsold houses stood at 13,987 units, accounting for 18.5% of the nationwide unsold inventory (75,438 units). With an estimated 36,000 units scheduled for occupancy in 2023, the upward trend in unsold houses is expected to continue for some time.

However, among the total unsold houses, about 64.1% are held by the top 30 housing construction companies, including large corporations, while local companies account for approximately 7.3%, suggesting that the impact on the regional economy is likely to be limited.

Daegu City has continuously made efforts to control housing supply within the region by strengthening building review standards related to sunlight rights (since July 2020), limiting floor area ratios for residential complexes in commercial areas (since June 2021), and maintaining a policy to suppress large-scale new housing site supply in outskirts. From June 2021, Daegu has repeatedly requested the Ministry of Land, Infrastructure and Transport six times for the preemptive cancellation of adjusted target area designations, resulting in the removal of all of Daegu, including Suseong-gu, from the adjusted target areas in July and September 2022.

Furthermore, to stabilize the housing market and enhance convenience for housing demanders, Daegu abolished the six-month residency restriction for housing subscription, and through meetings with housing construction businesses, has encouraged self-help measures such as order management, adjustment of sales timing, and consideration of post-sale, continuing in-depth discussions to resolve the unsold housing issue.

In addition, since August 2022, most areas of Daegu have been designated as unsold housing management areas to regulate the supply of new housing units. After changes in designation criteria by the Housing and Urban Guarantee Corporation (HUG) in February 2023, Jung-gu, Nam-gu, and Suseong-gu were re-designated as unsold housing management areas, and additional designation requests have been made for Dong-gu, Buk-gu, and Dalseo-gu, where supply control is necessary.

Along with the previously implemented strengthening of building reviews, approvals for newly submitted housing construction projects are being withheld, and all possible local measures, such as inducing post-sale and converting to rental housing, are being implemented to resolve unsold housing.

Despite these efforts by Daegu City, the increase in unsold houses continues, although recent housing transaction volumes are gradually recovering.

Daegu City Hall Sangyeok Office.

However, given the limitations at the local government level in housing market policies, Daegu has proposed to the central government various multifaceted measures to stabilize regional unsold housing, including transferring regulatory authority over designation and cancellation of adjusted target areas to local governments, implementing related housing policies such as purchase rental projects and repurchase conditional purchases to resolve unsold houses, activating designation of subscription contraction areas and related measures, easing or abolishing comprehensive real estate tax standards, changing loan repayment methods (reviving grace periods), providing policy interest rate support for housing demand, and relaxing DSR (Debt Service Ratio) regulations.

Kwon Oh-hwan, Director of the Urban Housing Bureau, stated, “Since the housing market is greatly influenced by external factors such as interest rates and prices, it will be difficult to resolve the current situation in the short term. However, we will actively seek measures to stabilize the housing market, including resolving unsold houses, and continuously propose them to the central government to ensure a soft landing of the housing market.”

A Daegu city official said, “Because the Ministry of Land, Infrastructure and Transport holds the authority to designate and cancel adjusted target areas, prompt responses are difficult. When Suseong-gu, Daegu was designated as an adjusted area in November 2020, the number of unsold apartments in Daegu was only 667 units. However, by September 2022, when Suseong-gu was removed from the adjusted area, unsold units had increased to 10,000. The delay in cancellation caused an explosive increase. We believe that if the authority is transferred to local governments, immediate responses will be possible.”