August 13 Housing Supply Measures, Conflict with Seoul… Market Skeptical of Villa Preference

Immediately after the government announced its housing supply measures on August 13, the Seoul Metropolitan Government issued an immediate statement of opposition. The Seoul Metropolitan Government claimed that the measures were unilaterally notified without prior consultation and stated that they were completely unaware of the plan to supply 1.3 million units.

Immediately after the government announced its housing supply measures, the Seoul Metropolitan Government issued a statement expressing dissatisfaction with the government's unilateral promotion of housing supply without proper cooperation.

A notable aspect of the government's August 13 housing supply measures is the government's clear preference for villa properties. Hwang Hyun, CEO, analyzed that the government seems to prefer the housing type of villas.

This is interpreted as reflecting the government's intention to use non-apartment housing (villas) as an alternative to quickly increase supply, given the current difficulties in supplying apartments in the housing market.

The housing supply measures announced by the government are being criticized for being too extensive and complex. Hwang Hyun, CEO, pointed out that the government is explaining something that could simply be announced as 'we will supply housing' in an excessively detailed and complex manner.

Concerns are raised that such complex content hinders the efficient execution of policies and makes it difficult for market participants to understand the core of the policy, leading to increased confusion.

Hwang Hyun, CEO, expressed skepticism about the claim presented in the first chapter of the government's measures, 'The housing supply situation in the public sector has improved since the 97 measures.' He pointed out that he could not find any evidence that the public housing supply situation had improved, no matter how much he searched for data.

Such claims may deviate from the actual market situation and are criticized for undermining the credibility of policy announcements. It is pointed out that the statistics or evidence presented by the government are not clear.

Hwang Hyun, CEO, pointed out that the biggest reason for the delay in public land development lies in the Korea Land and Housing Corporation (LH)'s severe debt problem. He stated that LH is burdened with enormous debt, so public land development has been completely halted due to a lack of funds.

He mentioned that while about 150,000 won per person will be distributed as living support funds this Chuseok (Korean Thanksgiving), the total cost of living support funds distributed so far amounts to about 100 trillion won, criticizing that such fiscal spending is not helping to solve LH's debt.

While the government's measures mentioned delays in licensing for redevelopment and reconstruction and difficulties in relocation and demolition, Hwang Hyun, CEO, attributed the causes to government regulations and loan problems. He explained that the delays in licensing are due to complex procedures and continuous government regulations.

He specifically pointed out that residents are having difficulty relocating or proceeding with demolition because relocation loans are not being properly issued, adding that this is a critical obstacle to redevelopment and reconstruction projects.

Hwang Hyun, CEO, emphasized that the current housing shortage is concentrated in Seoul, not in local areas, and is unrelated to PF (project financing) loan problems. He explained that most redevelopment and reconstruction in Seoul are carried out with funds from association members, so they are not affected by PF loans.

Unlike in local areas where PF loan problems affect housing supply, Seoul has its own fundraising capabilities, so the cause of housing supply delays cannot be found in PF loans. Therefore, the government's plan to increase housing supply by solving PF problems is not a solution for the Seoul area, he pointed out.

Hwang Hyun, CEO, pointed out that there is a large discrepancy between the concept of 'supply' announced by the government and the concept of 'supply' perceived by the market. He stated that the government considers purchasing existing homes and supplying them as supply, while the market views the construction and occupancy of new homes as genuine supply.

He explained that purchasing existing homes does not increase the overall housing stock, so the market does not perceive this as a substantial increase in supply. This difference in perception could reduce the effectiveness of government policies, he analyzed.

Hwang Hyun, CEO, asserted that the general public and market participants are not at all interested in supply figures like 1.3 million or 1.4 million units announced by the government. He stated that what the public truly wants is 'a house they can move into right now.'

He pointed out that even if many homes are announced for supply, if it takes a long time to actually move in or if they are not supplied in the desired area or form, it is difficult to feel the effect of the policy. Therefore, he emphasized the urgent need to devise measures that can contribute to practical housing stability rather than playing with supply figures.

Concerns have been raised that the government's housing supply measures are unlikely to be implemented. Hwang Hyun, CEO, explained that the government's plan is impossible without cooperation from various related agencies, such as military units and postal distribution centers. For example, he said that building rental apartments in front of government offices would involve issues like the relocation of district offices and complex problems related to the Ministry of National Defense.

In fact, the plan to develop Yongsan, an international business district, has not yet been coordinated with the Seoul Metropolitan Government, and after the August 13 supply measures were announced, the Seoul Metropolitan Government immediately opposed the Ministry of Land, Infrastructure and Transport's announcement, stating that it was only a notification of results without prior consultation, intensifying the conflict between the government and local authorities.

The government's housing supply measures are in direct conflict with the Seoul Metropolitan Government's plans to utilize green belts and public institution sites. This is because the Seoul Metropolitan Government has a firm stance of not releasing green belts or public institution sites. Hwang Hyun, CEO, criticized the government for unilaterally announcing the supply of 1.3 million units without consulting the Seoul Metropolitan Government, and even talking about supplying an additional 100,000 units.

This situation significantly lowers the realistic feasibility of the government's measures. Without the cooperation of the Seoul Metropolitan Government, large-scale housing supply using public sites in Seoul is virtually impossible, and this will act as a key limitation of government policy, he analyzed.

It appears that the government maintains a negative view on expanding housing supply through redevelopment and reconstruction. Hwang Hyun, CEO, pointed out that the government maintains the position that supply will not increase through redevelopment and reconstruction, and continues to emphasize only public housing supply.

The government has announced that it will supply 1.38 million units and an additional 100,000 units through the public sector, but this is criticized for lacking policy credibility or consistency. Concerns are raised that a policy stance that neglects redevelopment and reconstruction, a significant source of supply in the private sector, could exacerbate housing market instability.

Hwang Hyun, CEO, emphasized that public housing projects, such as the government's 1.2 measures, are virtually impossible without cooperation from the Seoul Metropolitan Government. He analyzed that with the Seoul Metropolitan Government opposing the government's housing supply plan, stating there was no prior consultation, the central government's unilateral promotion is bound to face limitations.

Seoul is a key area with concentrated housing demand, and without the Seoul Metropolitan Government's licensing authority and administrative support, it is difficult to carry out large-scale public housing projects. This further amplifies concerns that the government's supply measures may remain mere theoretical discussions.

Hwang Hyun, CEO, argued that to provide practical housing stability for low-income earners, youth, and newlywed couples immediately, loan regulations must be eased. He criticized the current situation where all loans are blocked, even for people earning 5 million won per month who should be able to get sufficient loans.

He stated that even loans for owner-occupied purposes are blocked, leaving people who need a house immediately unable to acquire one. Easing loan regulations was presented as a realistic measure that can solve immediate housing problems and relieve market pressure.

The government announced that it would support loans of up to 80% of the house price for young people, but concerns were raised about the lack of realism given that the target is 'non-apartments under 400 million won and under 85 square meters.' Hwang Hyun, CEO, asserted that it is difficult to find a villa under 400 million won in Seoul. He explained that with the current jeonse (lump-sum deposit) price of a two-room villa in Seoul reaching 300 to 400 million won, non-apartments under 400 million won are highly likely to be very small homes, less than 40 square meters.

Such a policy is merely 'desk theorizing' and is insufficient to solve the actual housing instability problem of young people, he criticized. Concerns are raised that while it nominally offers loan support, it fails to reflect market realities and will not provide practical benefits.

Looking at the changes in the average market price of 30-pyeong apartments in Seoul by government, it rose from 300 million won during the Roh Moo-hyun administration (2003) to 500 million won during the Lee Myung-bak administration, then slightly decreased to 480 million won during the Park Geun-hye administration. However, when the Moon Jae-in administration took power, the average apartment price in Seoul, which was 500 million won, soared to 1.26 billion won.

Subsequently, in the early days of the Yoon Suk-yeol administration, it seemed to remain stable, but in just one year, the price, which was 1.26 billion won, surged again to 1.65 billion won. This shows that apartment prices in Seoul have risen abnormally in a short period, and this upward trend continues under the current government.

During the Lee Myung-bak administration, out of a 10-year plan to supply approximately 1.5 million housing units, 130,000 'Bogeumjari' housing units were supplied, primarily concentrated in key areas such as Gangnam, Seocho, Goyang Wonheung, Misa, Guri Galmae, Namyangju Jingun, Bucheon Ok-gil, Naegok-dong, Segok-dong, Siheung Eun-gye, Hyangdong, Incheon Guwol, Hanil, Seongnam Wirye New Town, Yangwon, Godeok Gangil, Gwacheon Knowledge Information Town, Seoul Sinjeong, and Seoul Ogeum.

The large-scale supply of Bogeumjari housing in these high-demand core areas contributed to stabilizing the housing market at the time. This suggests that the quality and location of supply have a significant impact on the market.

Hwang Hyun, CEO, criticized the government's policies of destroying the jeonse market without housing supply, regulating loans, and pressuring multiple homeowners, which are pushing tenants into housing insecurity. He specifically pointed out that regulations on 'non-resident single homeowners' are forcing approximately 830,000 such homeowners to live in their vacant homes, inevitably driving existing tenants onto the streets.

He warned that even if only 10% of the 830,000 choose to reside in their homes, 83,000 tenants would have to relocate, and if an additional 45,000 relocation demands over the next three years are added, the housing market would become extremely unstable. This analysis suggests that government policies are out of touch with market realities and could exacerbate housing market instability.

As the government's conditions for exclusion from the number of houses calculation were extended by one year, from December 31, 2027, to December 31, 2028, initial sale housing units under 60 square meters and under 600 million won will not be subject to heavy taxation on acquisition tax, capital gains tax, and property tax. This means they will be excluded from the number of houses.

Hwang Hyun, CEO, predicted that with these eased regulations and the government's policy of blocking apartment loans while supporting only villa loans, the demand for villas is likely to increase further. This suggests the possibility of villas emerging as an investment target for 'a smart single unit,' leading to scarcity and price increases in the villa market, he analyzed.

It is expected that those who own 'smart single unit' villas will benefit additionally from the government's eased regulations and loan support policies for non-apartments. Hwang Hyun, CEO, analyzed that the market will naturally move in this direction.

In particular, non-apartments that meet the conditions for exclusion from the number of houses calculation among initial redevelopment properties in areas near the Han River, GTX stations, and large-scale business districts are expected to become highly scarce and significantly increase in price. This suggests that new investment opportunities may arise in the non-apartment market.