The newly launched Lee Jae-myung government is expected to bring out the card of "expanding dwelling supply" as the top priority goal of its real estate policy, which is "stabilizing housing prices." As the instability in housing prices due to supply shortages becomes a reality, the government will focus on expanding dwelling supply. Considering that past demand suppression policies through taxes led to failures in the real estate market, the government plans to alleviate supply instead of suppressing demand with taxes, aiming to balance supply and demand. The expansion plans are likely to be led by the public sector.
With Lee Jae-myung taking office on the 4th, the top policy goal in the institutional sector of real estate is expected to be the stabilization of housing prices. President Lee has indicated since his candidacy that the goal of the real estate policy would be stabilizing housing prices, stating, "I will concentrate on housing supply policies for the middle class and the common people."
Currently, the real estate market is seeing a phenomenon of "gathering of one good house" intensifying, with housing prices soaring especially in areas like Gangnam. In the metropolitan area, including Seoul, supply shortages are leading to market instability. As of April this year, the three key indicators for estimating dwelling supply—permit approvals, groundbreaking, and completions—have all sharply declined. According to Real Estate R114, the number of apartments available for move-in in Seoul next year is 24,400. This is only about half of this year's level.
◇250,000 dwellings to be supplied during the term... redevelopment of first-generation new towns and development of fourth-generation new towns
The new government seems set to respond to the instability in housing prices with supply expansion. President Lee noted on the 30th of last month, "The idea is to increase supply to match demand and supply," adding, "Stabilization of housing prices should be the goal, and it will be different from previous democratic governments."
President Lee has pledged to supply 250,000 dwellings during his term, indicating that he will likely push for the expansion of dwelling supply from the early stages of his presidency. The supply plans are expected to focus on the redevelopment of aging infrastructure and the development of new sites. This is because President Lee advocated for increasing supply through the redevelopment of first-generation new towns and the creation of fourth-generation smart cities during his campaign.
President Lee stated in April, "First-generation new towns (Bundang, Ilsan, Sanbon, Jungdong, and Pyeongchon) will be completely redeveloped to enhance urban functions and housing quality," and added, "We will prepare for the development of fourth-generation smart new towns to supply comfortable and affordable dwellings to young people and newlyweds."
In particular, the new government plans to promote the relaxation of redevelopment and reconstruction procedures, as well as floor area ratios and building coverage ratios, under the principle of enhancing public interest, which indicates that supply in metropolitan areas like Seoul, where demand is high, is expected to increase.
The emphasis on expanding dwelling supply as a policy to stabilize the real estate market by President Lee is because past policies that suppressed demand through taxes led to side effects such as soaring housing prices.
During campaign rallies and media interviews, President Lee stated, "In the future, the Democratic Party's real estate policy will not manage prices by suppressing demand with taxes when prices rise due to excessive demand, but will increase supply to maintain reasonable prices." He went on to say, "Generally, progressive administrations have implemented demand suppression policies through taxation or ownership restrictions, but demand has overcome such suppressions. I will not manage housing prices through taxes."
However, the fact that the construction of third-generation new towns and the lifting of restrictions on development areas (green belts), which were pushed by the previous government, are still not completed makes it seem difficult to quickly resolve the current dwelling supply cliff issue.
Kim Hyo-sun, chief real estate officer at NH Nonghyup Bank, noted, "Rather than regulating through demand, the policy stance is to promote market stabilization through supply expansion, and in particular, it is expected that we will be able to supply dwellings in the areas desired by consumers through revitalizing urban redevelopment and reconstruction efforts. However, similar dwelling supply plans were announced and attempted several times during the previous administration, but there are issues with the lack of feasibility to actually lead to occupancy."
◇Expansion of public housing... mandatory public housing in private projects
The policy for expanding dwelling supply is likely to be centered on the public sector. President Lee stated through his real estate policy commitments, "I will gradually increase the ratio of high-quality public rental dwellings and public rentals," and added, "I will activate the urban public dwelling complex business model to expand public rental dwellings."
President Lee stated, "I will expand the supply of various public offerings that are cheaper than market prices and have no speculation concerns," specifically presenting types of public housing such as ▲ land lease ▲ profit-sharing type (repurchase agreements) ▲ equity accumulation type ▲transitional public rental dwellings. He also announced plans to increase public rentals tailored to the life cycle of young people, newlyweds, and the elderly.
In particular, the promise by President Lee to pursue the "legalization of the public rental housing supply roadmap" indicates that the public-centered supply is expected. This means that plans for expanding public rental housing will be determined legally, suggesting a strong policy drive for expanding public rental housing.
Expansion of dwelling supply through private projects will also be pursued. President Lee announced plans to expand Real Estate Investment Trusts (REITs) for stable supply from both the public and private sectors. This plan involves using REIT shares as contract money for monthly rent tax deductions and creating a structure to secure 100% ownership in 10 years through obtaining REIT shares in the future. However, public interest will also be important in private projects. President Lee stated in his commitments, "I will also enforce mandatory public housing in private housing projects."
The government is expected to not only implement policies for expanding supply but also aim to stabilize housing prices through strengthened loan management. The promise of President Lee is to establish a stable management policy for household debt totals. To this end, he has pledged to regularize the interagency meetings to ensure a balance between housing price stability policies and financial system stability policies, suggesting that interdepartmental collaboration for housing price stability will be strengthened.