Minister of Land, Infrastructure and Transport: "House Prices Are Not on a Trend of Increase... Refrain from Market Intervention"

"Situations of reckless house price increases like in the past will not be repeated"
"3rd New Town construction underway, significant housing supply planned"
"Government market intervention causes side effects, no policy intervention"

"Local construction companies to circulate 1 trillion won through CR REITs"
"Law related to support for jeonse fraud victims to be proposed by government next week"

Minister of Land, Infrastructure and Transport Sang-woo Park. Photo by Yongjun Cho jun21@

Park Sang-woo, Minister of Land, Infrastructure and Transport, recently assessed the real estate market where apartment prices are rapidly rising, centered around the three Gangnam districts in Seoul (Gangnam, Seocho, Songpa) and Mayongseong (Mapo, Yongsan, Seongdong), stating, "I believe this is a regional and temporary fluctuation," and added, "I do not think it is transitioning into a trend of sustained increase."

At a press briefing held on the 10th in Sejong City, Minister Park said, "Due to our country's economy, real estate market, and demographic issues, there is no power for housing prices to rise by several tens of percent (%)." He added, "I think the situation where housing prices rose drastically for several years in the past will not be repeated."

He continued, "Interest rates and construction cost burdens are high, and the range of buyers is not broad," citing as evidence that "the 3rd phase new towns have begun construction, and a significant housing supply is scheduled soon," indicating that housing price increases will not continue. Regarding government policy intervention, he stated, "Personally, I believe government market intervention does not have a significant effect and can have adverse effects," and added, "It is appropriate to refrain from market intervention."

He said that regulations on multi-homeowners should be eased. He explained, "Owning multiple homes is inappropriate in a community when housing is scarce, but currently, there are many unsold apartments in provincial areas," and added, "The issue of multi-homeowners in provincial areas should be addressed from a different perspective, which is the basic stance, and we plan to implement this policy-wise."

Regarding local construction companies facing difficulties due to real estate project financing (PF) issues, he said, "A corporate restructuring (CR) REIT, which will purchase unsold apartments, is scheduled to be launched soon." When CR REITs purchase unsold housing in provincial areas, they are exempt from acquisition tax surcharges and are excluded from the comprehensive real estate holding tax aggregation. Minister Park explained, "I understand that local construction companies have applied to purchase 5,000 unsold units," and added, "Once the CR REIT is launched soon, even if priced at 2 billion won per unit, it will amount to 1 trillion won, and this 1 trillion won can directly flow into the construction industry immediately."

Regarding recent cancellations of pre-sale applications due to soaring construction costs making it impossible to build apartments, he said, "We will review the situation at the time of government announcement and the terms of the announcement to examine what responsibilities suppliers and demanders should bear."

Meanwhile, on measures against jeonse (long-term lease) fraud, he said, "Tomorrow (the 12th), we will hold a meeting with representatives of jeonse fraud victims and plan to propose a bill regarding support for jeonse fraud victims within the ruling party next week."

Regarding the controversy in Seongnam City, Gyeonggi Province, which is about to select a lead district for the 1st phase new towns, where the city initially announced removing the commercial consent rate from the selection criteria but reversed the decision after some allegations of preferential treatment for certain complexes, Minister Park said, "After checking with the responsible department at the Ministry of Land, Infrastructure and Transport, I heard that Seongnam City's criteria do not violate the guidelines we set," and added, "It is the authority of the local government head, so it is not appropriate to interfere."

Regarding delays in the start of various social overhead capital (SOC) projects such as Heuksando port, Ulleungdo airport, and the Seoul Metropolitan Area Express Train (GTX)-C line due to rising construction costs, Minister Park said, "It is said that construction costs have risen by more than 30% over the past five years," and added, "We recognize this issue and are discussing it with the Ministry of Economy and Finance. We are currently conducting verification work to reflect realistic construction costs, and we will announce related details as soon as possible."