[9·26 Supply Measures] Experts: "Government's Supply Commitment Positive... Limited Perceived Impact"

The government will actively promote measures to revitalize housing market supply, including securing an additional 120,000 public housing units and introducing a fast-track method to advance the supply schedule. Various support measures such as extending project financing (PF) maturities and providing guarantee support to improve conditions for private housing projects will also be implemented. Experts positively evaluated the government's proactive approach to addressing supply shortages but predicted that the perceived effects of the measures would be limited.

[Image source=Yonhap News]

Additional 120,000 Public Housing Units... Regulations Also Eased in Non-Apartment Sectors

On the 26th at 2 p.m., the government held the 6th Real Estate Related Ministers' Meeting at the Government Seoul Office and announced the "Housing Supply Activation Plan for National Housing Stability," which includes these measures.

This action comes as a response to the worsening supply conditions since the second half of last year, which caused a contraction in private housing supply (permits and construction starts), despite the government’s plan to supply 2.7 million units and efforts to rationalize supply regulations.

First, the government will secure an additional supply of about 120,000 units in the public sector through new towns in the metropolitan area (30,000 units), new housing sites (85,000 units), and converting private supply to public (5,000 units), and accelerate supply speed via a fast-track process.

Additionally, various support measures will be introduced to improve conditions for private housing projects so that the backlog of permits and construction starts can resume promptly. Sufficient public guarantees will be provided to ensure smooth financing for normal projects, and financial supply from policy and private financial institutions will be expanded.

To strengthen the housing ladder role, construction funds for non-apartment housing will be supported (through fund support and new guarantee products), and the criteria for considering applicants as non-homeowners for subscription will be relaxed.

Furthermore, to ensure rapid and uninterrupted urban supply, disputes over construction costs in redevelopment projects will be prevented and resolved early, and procedural improvements will be made to accelerate progress.

Through these measures, the government plans to achieve this year’s target of 470,000 units (permits) to the fullest extent, supply over 1 million units by next year, and expand capacity to exceed the current government’s goal (2.7 million units + α).

Choo Kyung-ho, Deputy Prime Minister and Minister of Economy and Finance, emphasized in his opening remarks, "From this year through next year, we will supply over 1 million housing units (based on permits) and successfully achieve the Yoon Seok-yeol administration’s 5-year plan of 2.7 million units. To this end, we will strengthen the role of a catalyst by securing an additional 120,000 units in the public sector."

Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho, Minister of Land, Infrastructure and Transport Won Hee-ryong, and Financial Services Commission Chairman Kim Ju-hyun are announcing the "Housing Supply Activation Plan" on the 26th at the Government Seoul Office in Jongno-gu, Seoul. This housing supply measure includes advancing the supply schedule for the 3rd phase new towns and partially expanding the quantity. Photo by Jo Yong-jun jun21@

Supplementary Measures to Accelerate Housing Supply Speed, Securing Execution Power Is Key... "It Will Take a Long Time to Feel the Effects of Supply Measures"

Experts positively evaluated the government’s proactive measures to resolve the contraction in housing supply caused by high interest rates and inflation.

Ham Young-jin, Head of the Zigbang Big Data Lab, said, "The government’s active expression of intent to resolve the polarization in the subscription market, inflation, and housing supply contraction due to PF loan cooling is positive. I believe they have prepared supplementary measures to prevent the spread of insolvency and accelerate overall housing supply through liquidity provision to construction companies and tailored support by PF project type."

Yoon Ji-hae, Research Team Leader at Real Estate R114, said, "To resolve the current issue of reduced supply indicators, in the short term, the focus must be on active public sector volume expansion. In the mid-to-long term, actively supporting private sector participation is necessary to maximize the effect of supply expansion. Since the government’s supply measures cover these aspects, what is now required is prompt execution with a sense of urgency."

However, experts predicted that considering the time required until actual supply, the perceived effects of the government’s supply measures will be limited. Ham Young-jin said, "Considering the inherent inelasticity of the housing and real estate supply market, it will be difficult for consumers to immediately feel the effects of housing supply policies. Especially, non-apartment related measures are expected to show policy effects mainly in some central areas like Seoul rather than in provinces."

Yoon Ji-hae added, "Among the measures, short-term effects are expected from securing additional volume in the 3rd new towns and shortening public project procedures. However, parts requiring institutional changes such as regulatory normalization, redevelopment project procedural improvements, and non-apartment regulation improvements need parliamentary discussion, so supply effects can be expected over a longer period."

It was also pointed out that the current supply contraction is caused by external factors such as high interest rates and inflation, and there are limits to offsetting these with domestic policies.

Lee Eun-hyung, Research Fellow at the Korea Institute of Construction Policy, said, "The overall policy intent is positive, but the effects are expected to be limited. Since housing supply expansion has become very difficult since the US interest rate hikes last year, it is a time when offsetting external factors with domestic policies has limitations."

Although the government has prepared incentives such as easing resale restrictions on public land and permit incentives, the core of private projects is profitability, so there is little incentive to hasten construction starts on undeveloped land.