New home sup­ply plan

Re­gain­ing mar­ket con­fi­dence key to suc­cess

The Korea Times - - OPINION -

The Moon Jae-in ad­min­is­tra­tion has come up with a new anti-spec­u­la­tive hous­ing pack­age aimed at build­ing 132,000 homes in Seoul and its sur­round­ing ar­eas. One of the key mea­sures is to ease re­stric­tions on the re­con­struc­tion of aging apart­ment build­ings to in­crease the home sup­ply.

We pos­i­tively as­sess the pack­age, the 23rd of its kind un­der the Moon govern­ment, al­though it came be­lat­edly. The rea­son is that the ad­min­is­tra­tion has shifted its pol­icy from sup­press­ing de­mand to ex­pand­ing sup­ply. It has so far failed to bring sky­rock­et­ing home prices un­der con­trol ap­par­ently be­cause it fo­cused on rais­ing prop­erty-re­lated taxes and tight­en­ing mort­gage ceil­ings.

Those re­stric­tive mea­sures have only back­fired as peo­ple keep rush­ing to buy homes to seek rel­a­tively high rents and make hand­some cap­i­tal gains amid record­low in­ter­est rates and ex­cess liq­uid­ity. But Moon and his pol­i­cy­mak­ers had re­fused to pay heed to the mar­ket ex­perts who called for in­creas­ing hous­ing sup­ply.

An­nounc­ing the pack­age Tues­day, Fi­nance Min­is­ter Hong Namki said the au­thor­i­ties will dou­ble the floor area ra­tio to 500 per­cent to en­able re­con­struc­tion projects to build far more homes. At the same time they will al­low such projects to build high-rise apart­ments of up to 50 sto­ries, com­pared with the cur­rent ceil­ing of 35.

Yet these dereg­u­la­tory steps will only ap­ply to build­ing projects where a large por­tion of the new apart­ments will be sup­plied for pub­lic rental hous­ing for those with­out homes, and sold to new­ly­weds and young adults. Hong de­scribed this ex­per­i­men­tal pol­icy as a “high-den­sity re­con­struc­tion plan” jointly pushed by pri­vate con­struc­tion com­pa­nies and pub­lic en­ti­ties such as the Land & Hous­ing Corp. (LH) and Seoul Hous­ing & Com­mu­ni­ties Corp. (SH).

The plan is seen as a novel idea to build and sup­ply more homes in a lim­ited land space, es­pe­cially in the af­flu­ent res­i­den­tial ar­eas of south­ern Seoul. By pro­mot­ing joint pri­vate-pub­lic re­con­struc­tion projects, the govern­ment plans to sup­ply 50,000 apart­ments by 2025.

How­ever, no one can tell if the plan will be good enough to cool the over­heated hous­ing mar­ket. Most own­ers of aged apart­ments in south­ern Seoul are re­luc­tant to ac­cept the govern­ment-pro­posed re­con­struc­tion projects be­cause they do not want to al­lo­cate part of their to-be-built apart­ments for pub­lic rental hous­ing.

Ex­ces­sive govern­ment in­ter­ven­tion in any re­con­struc­tion projects could be a recipe for fail­ure. Thus, the lib­eral Moon ad­min­is­tra­tion needs to re­spect mar­ket prin­ci­ples and de­vise mar­ket-friendly poli­cies if it re­ally wants to win the fight against run­away hous­ing spec­u­la­tion.

The first thing of­fi­cials should do is to re­gain mar­ket con­fi­dence and the pub­lic’s trust in their anti-spec­u­la­tive poli­cies. Most of all, they should ad­mit their pol­icy blun­ders and apol­o­gize for the rail­road­ing of bills aimed at rais­ing prop­erty and cap­i­tal gains taxes through the Na­tional As­sem­bly.

Pol­i­cy­mak­ers should re­al­ize that the pas­sage of three bills aimed at pro­tect­ing ten­ants is bring­ing about a surge in rents with­out sta­bi­liz­ing the hous­ing mar­ket. In a nut­shell, they are out of touch with re­al­ity. Nev­er­the­less, we hope that the new anti-spec­u­la­tion pack­age will be the last one needed.

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