"Greenbelt Release Takes 10 Years Until Construction... No Immediate Supply Effect" [Q&A]

80,000 Greenbelt Release Houses, 210,000 Purchased Rental Houses
20,000 Additional Houses Supplied Using Reserved Land in 3rd New Town

Photo of Jin Hyun-hwan, 1st Vice Minister of the Ministry of Land, Infrastructure and Transport. [Photo by Yonhap News]

The government will supply more than 210,000 additional housing units by 2029. To achieve this, it will lift the Greenbelt in Seoul for the first time in 12 years to create housing for about 80,000 units. Additionally, over 210,000 units will be provided through new purchases by the Korea Land and Housing Corporation (LH), and an additional 20,000 units will be secured by utilizing reserved land in the 3rd New Towns.

On the 8th, the Ministry of Land, Infrastructure and Transport (MOLIT) announced these plans at the government Sejong office under the title "Housing Supply Expansion Plan for National Housing Stability."

MOLIT plans to supply a total of more than 427,000 units by 2029 by accelerating the pace of ongoing projects in addition to the new supply. The ongoing projects include 130,000 units from redevelopment projects, 46,000 units from the 1st New Towns, 36,000 units from LH’s commitment to purchase unsold apartments, and 5,000 units from converting post-sale to pre-sale in post-construction sales. In particular, for redevelopment projects, the government plans to speed up the process by simplifying procedures and supporting measures such as increasing floor area ratios.

The following is a Q&A with five MOLIT officials including Jin Hyun-hwan, the 1st Vice Minister of MOLIT, and Kim Heon-jeong, the Director of Housing Policy at MOLIT.

- Has the lifting of the Seoul Greenbelt been finalized in consultation with the Seoul Metropolitan Government? It would be difficult to lift the Greenbelt without Seoul’s cooperation.

▲ The lifting of the Seoul Greenbelt is a confirmed matter. Recently, MOLIT Minister Park Sang-woo met with Seoul Mayor Oh Se-hoon to discuss this. However, we cannot yet disclose which areas of the Greenbelt in Seoul will be lifted. That said, many preferred areas within Seoul are included. Specific details will be announced in November.

- Even if the Greenbelt is lifted, it takes a long time from land acquisition to completion, so the supply effect might be limited.

▲ It is more important to send a signal of housing price stabilization to anxious demanders than immediate supply effects. Recently, apartment prices have risen mainly in Seoul, and many buyers purchase out of anxiety even if they do not have immediate plans to buy a house. Increasing housing supply by lifting the Greenbelt helps reduce their anxiety. Even after lifting the Greenbelt, it takes 8 to 10 years for district designation, planning, land compensation, and construction to be completed. Although there is no immediate supply effect, since quality housing can be supplied affordably under the price ceiling system in Seoul, it is expected to ease demanders’ anxiety.

- Recently, MOLIT said that the apartment supply in Seoul for this year and next year is sufficient. Why then is the Greenbelt being lifted?

▲ The apartment supply in Seoul is about 38,000 units this year and about 48,000 units next year, which is sufficient. However, recent permits and construction starts have not reached long-term averages, so there is a possibility of a shortage in future supply. Therefore, the Greenbelt is being lifted.

- MOLIT has temporarily designated the entire Seoul Greenbelt and metropolitan area as land transaction permission zones to prevent speculation caused by lifting the Greenbelt. When will this be applied?

▲ On the 7th, the Seoul Urban Planning Committee and the MOLIT Central Urban Planning Committee approved the designation of land transaction permission zones. The effect takes place five days later. From the 13th, transactions in the Greenbelt will require permission from local governments.

- If preferred areas of the Greenbelt are lifted, there may be a rush for “lottery” style sales. In 2012, the supply of public housing through Greenbelt lifting also sparked controversy over “lottery apartments.”

▲ “Lottery” sales occur when supply is limited. Recently, even unsold units from general reconstruction sales are called “lottery.” However, when ample supply is provided affordably, it is expected to lower surrounding market prices rather than create “lottery” sales.

- Besides lifting the Greenbelt, you said you will continue to increase purchase rental housing. Has the budget for purchases been secured?

▲ The housing purchase budget has already been agreed upon with the budget authorities. When LH purchases housing, the government provides 70% of the purchase price as financial support, and LH bears the remaining 30%.

- You included apartments in the conversion of purchase rental housing to sale.

▲ The purpose of purchase rental housing with sale conversion is to provide space for 3-4 person households rather than single-person households. Therefore, we plan to purchase housing sized 60㎡ to 85㎡. As the size increased, apartments as well as non-apartments are included. This reflects market preferences.

- Apartment jeonse (long-term lease) prices in Seoul are also rising. What is the countermeasure?

▲ The sure countermeasure for jeonse prices is supply. The rise in jeonse prices stems from anxiety that housing will not be properly supplied in the future. Steady housing supply is important. Also, jeonse fraud has intensified apartment concentration, but increasing purchase rental housing is expected to alleviate this. Since the owner of the housing purchased by LH is LH itself, anxiety about jeonse fraud can be reduced.