[Reporter’s Notebook] Suspicious Signals Cannot Control the Real Estate Market

'Housing supply shortage, spreading panic buying' vs 'Ministry of Land, Infrastructure and Transport (MOLIT), sufficient housing supply in Seoul and metropolitan area.' These vastly different phrases were the headlines of real estate articles last week. The former is a diagnosis based on figures from private companies, while the latter is a rebuttal based on the government's own survey results.

The reason for the stark contrast in the articles lies in the 14,000-unit difference in the estimated number of apartment move-ins in Seoul this year between the government and private sector. MOLIT stated that 37,897 units would be supplied, but Real Estate R114 projected only 23,830 units. Next year, this gap widens to 23,000 units. MOLIT forecasts 48,329 units, while Real Estate R114 expects 25,067 units.

Why is there such a large discrepancy between the two estimates? The government's figures include public housing move-ins, small-scale redevelopment projects, and urban-type residential housing with fewer than 30 units. For example, they count 7,000 units this year and 15,000 units next year of station-area youth housing as part of the supply. On the other hand, the private sector is stricter, basing their estimates solely on move-in recruitment announcements.

The difference due to the counting method is understandable. However, it is important to note that the type of housing currently pointed out as 'in short supply' in the real estate market is 'private newly built apartments.' This is why areas with relatively many new constructions, such as Mapo-gu and Seongdong-gu, are seeing record-high prices and pre-purchase rushes. How many Seoul citizens would consider youth rental housing, which requires specific conditions to enter, as part of the supply, as the government statistics suggest?

Last week (as of the 15th), the Korea Real Estate Board announced that Seoul's housing price increase rate was 0.28%, the largest rise in 5 years and 10 months. At this level, the Seoul apartment sales market can be likened to a 'patient.' However, if public and private institutions, akin to medical staff, give opposite diagnoses about the same patient, it is unlikely that proper treatment will follow. This is why a real estate expert pointed out right after the government measures were announced, "There is a need to unify the private and public apartment move-in methodologies. Different estimation methods cause confusion in the market."

Looking deeper into the government's housing supply plan, MOLIT's message to the public to "not worry" is ironically more worrisome. The Korea Land and Housing Corporation (LH) aims to approve 105,000 public housing units this year. However, according to the office of Assemblyman Ahn Tae-jun of the Democratic Party, only 94 units had been approved by May. LH says approvals will increase in the second half of the year, but it remains to be seen how close they will come to the target. Moreover, for construction rental housing directly built by LH, even if approved this year, the units will only be completed 4 to 5 years later, so they will hardly help stabilize housing prices immediately.

The situation is similar for purchase rental housing, where LH buys houses built by private developers and rents them to the public. They promised to supply 130,000 units by next year, but whether this promise will be kept is uncertain. Even if LH issues purchase announcements, private developers are reluctant to build due to high interest rates and regulations.

The government's efforts to signal housing supply and stabilize the market are essential as the market becomes more unstable. However, the public must trust these signals for them to be effective. Ambiguous signals cannot control the movements of the real estate market.