Public Gains from Pangyo Development 11.5 Trillion Won
If Pursued by SH Method, 23.9 Trillion Won
SH Method is 50% Land Lease and 50% Long-term Jeonse
"Minimize Private Land Sales and Maintain Public Ownership"
Analysis suggests that if the Pangyo New Town developed by LH (Korea Land and Housing Corporation) had been developed by Seoul Housing and Communities Corporation (SH Corporation) using the SH (Gold Town) method, the public asset value would have been 2.1 times greater than it is now. Instead of the increase in asset value from rising house prices benefiting those who purchased homes in Pangyo, the public ownership of asset value would have increased significantly. There is a call to apply the SH method to the government’s recent plans to supply new housing after lifting Greenbelt restrictions and to the development of the 3rd New Town to minimize the privatization of development profits.
On the 24th, SH Corporation and SH Urban Research Institute analyzed the development method of Pangyo New Town and announced simulation results applying the SH (Gold Town) method. First, the profit and asset value increase LH gained from the Pangyo New Town apartment development project was estimated at 11.5 trillion KRW. Of this, land sale profits were 1.9 trillion KRW, housing sales profits were 3.5 trillion KRW, and the increase in public rental housing assets held was 6.1 trillion KRW. The capital gains earned by the homebuyers were estimated at 23.4 trillion KRW, accounting for 54.4% of the development profits in Pangyo. This means that homebuyers took a larger share of the asset value increase from the Pangyo development than LH did.
It was observed that if SH Corporation had developed Pangyo using the SH method, the asset value would have reached 23.9 trillion KRW, which is 2.1 times the asset value gained through the LH development method. The SH method refers to supplying housing only through land leasehold sale apartments (50%) and long-term jeonse (lease) (50%). By supplying land leasehold sale apartments without selling apartment land like LH, the capital gains of homebuyers can be minimized. SH Corporation claims that this method could stabilize house prices by about 9.5 trillion KRW across Pangyo.
The government, which is making every effort to stabilize house prices, believes that the SH method should be actively introduced in public housing supply. The SH Urban Research Institute stated that even when releasing Greenbelt land for housing supply, the SH method, where the public sector retains land ownership, should be adopted. Development projects involving land compensation and acquisition should minimize the privatization of development profits, and publicly owned land should be used as a foundational resource for various projects benefiting future generations.
The SH Urban Research Institute also emphasized that in the development of the 3rd New Town, land sales to the private sector should be minimized. The sale ratio of public housing in the 3rd New Town is set at ‘up to 30%’, which is higher than the 2nd New Town’s minimum of 15%. The institute stated, "Holding land through the SH method is advantageous in terms of legitimacy and asset value," and stressed that "it is desirable to expand the proportion of land leasehold and public rental housing that can hold land long-term."
Additionally, it was argued that public housing district developments in Seoul’s Greenbelt release areas should be led by SH. Although developable land within Seoul is running out, LH has continuously expanded its participation in projects since 2005.
Kim Heon-dong, President of SH Corporation, said, "The 3rd New Town, which is being promoted to stabilize Seoul’s housing prices, must not repeat the failures of past new towns," and added, "SH should also participate jointly in the 3rd New Town project or apply the SH (Gold Town) development method."
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