Minister of Land, Infrastructure and Transport: "Housing Prices Stabilizing Downward... Will Increase Private Rental Housing" (Comprehensive)

Minister Park Sang-woo of the Ministry of Land, Infrastructure and Transport Holds Press Briefing on the 5th
Proposes 5 Major Policy Paradigms

"Support Redevelopment and Reconstruction, Activate Long-term Rental Housing"
"If House Prices Were Expected to Rise, Regulation Easing Would Not Be Possible. Future Trend Is Downward Stabilization"
"Government Should Not Intervene to Increase Rental Housing"
"Yongsan International Business District to Become a Model for Development Above Railway Areas"

Park Sang-woo, Minister of Land, Infrastructure and Transport, stated, "We will change redevelopment and reconstruction from being subjects of regulation to targets of support, and supply high-quality rental housing built by the private sector to transition the unstable jeonse system into a long-term rental system." Minister Park, who took office last December, announced five major policy plans to be pursued during his term at a Ministry of Land, Infrastructure and Transport press briefing held in Sejong City on the 5th. These include 'Support for Redevelopment and Reconstruction,' 'Activation of Rental Housing,' 'Connecting Cities with the Metropolitan Area Express Railway (GTX),' 'Railroad Undergrounding Project,' and 'Overseas Urban Development Expansion.'

"A Good Timing to Change Redevelopment and Reconstruction Policies"

Regarding redevelopment and reconstruction, he said, "Redevelopment and reconstruction that supply housing in urban areas can solve both housing price stabilization and citizens' commuting time issues," adding, "In the past, regulations could not be easily lifted because housing prices were expected to rise, but now, with interest rates at quite high levels, it is a very good timing to change the policy direction on redevelopment and reconstruction."

Minister Park explained, "In a capitalist economy, recessions occur, and the government's role is to reduce their amplitude. The government cannot and should not forcibly turn a recession into a boom," and added, "(Redevelopment and reconstruction) is not aimed at economic stimulus but is a measure to stabilize the market by removing unnecessary regulations."

He said, "If it were a period when housing prices were likely to flare up, we would not have been able to ease redevelopment and reconstruction regulations," and "I believe that for a considerable period going forward, housing prices will follow a downward stabilization trend, so there will be no sudden surges or crashes."

He continued, "If housing prices seemed to be stabilizing now, (when redevelopment and reconstruction measures were announced) prices would have bounced up like a spring," but "Now, with high interest rates, low economic growth, and housing prices already having risen significantly, I think it is the right time to lift regulations."

"The Private Sector Must Supply Long-Term Rental Housing"

Regarding the transition from the jeonse system to a long-term rental housing system, he pointed out, "Currently, about 55% of people live in their own homes, and the rest live in jeonse or monthly rent. Living in monthly rent is often perceived as unstable or undesirable housing," adding, "Jeonse prices have risen a lot, making it difficult to prepare jeonse deposits when getting married, and living on monthly rent is almost like living with a bank."

He then said, "We need to change the housing paradigm from unstable jeonse to stable long-term rental," and "Since this can also reduce the risk of gap investment caused by jeonse, we are preparing a system to supply a large amount of high-quality long-term rental housing."

Regarding measures to activate long-term rental housing, Minister Park said, "The government just needs to 'not touch' the market," adding, "I think the best approach is neither to support nor intervene." He explained, "Individual companies have land, and if they build facilities similar to silver towns there, I think there will be high demand for long-term rental housing."

He continued, "If the government supports, it tends to control by not allowing rent increases, which undermines business viability," emphasizing, "We need to create a path for various housing to be supplied through purely private rental operations."

Railroad Undergrounding to Start with Prepared Local Governments

Regarding GTX, he said, "By supplying metropolitan urban railways to connect cities, concentration will occur where it should, but dispersion will be more effective, which will strengthen the economy," and "It will create a competitive structure that gives the Seoul metropolitan area and large local cities the driving force to develop easily."

He likened the railroad undergrounding project, which moves above-ground railroads underground and develops the space above the railroads, to changing "shacks beside the railroad tracks" into "beautiful buildings above the railroad tracks." He said, "The opposition party leader also announced this as a pledge, and the law was created with bipartisan agreement," evaluating, "Since it is a project supported by both ruling and opposition parties, it has become a 'trump card' for the responsible ministry."

He said, "We will proceed starting with areas with high business feasibility." He added, "The law allows development projects not only for the railroad and stations but also for surrounding areas," and "Local governments will lead the projects as urban development projects, so we plan to implement pilot zones starting with local governments that are well prepared."

Furthermore, he said, "We must extract as much development profit as possible from the railroad undergrounding project," and "The government will contribute national railroads as in-kind capital, and the key for the private sector is how to minimize costs efficiently during construction." The Ministry of Land, Infrastructure and Transport plans to issue a comprehensive plan service order this month and select target lines by December next year.

Minister Park expressed great interest in the Yongsan International District development plan announced by Seoul City, saying, "It can serve as a model for development of areas above railroads," and "There is definitely development demand in major urban areas." However, he added, "If development focuses mainly on offices, businesses, and retail as in the past, there will be unsold units, so success requires deriving demand for high-end residences and recreational spaces and developing the space accordingly."

He also announced support for construction companies' overseas expansion. Minister Park said, "According to UN estimates, cities housing 100 million people per year will be needed worldwide in the future," and "Since domestic construction companies have built many cities and power plants, we will make overseas urban development demand a main market for Korean construction companies."

Repealing the Three Lease Laws Would Only Cause Confusion

Regarding the Three Lease Laws, which have been criticized for causing a surge in jeonse prices, he expressed a cautious stance. He said, "I am quite opposed to the lease laws because they excessively restrict landlords' rights," but added, "We should carefully consider before reverting these laws to their previous state," meaning that since the system is already established, changing it again could cause confusion.

Regarding support measures for apartment remodeling projects, another axis of maintenance projects, he stated, "We are not considering policies to promote remodeling."