SEOUL – South Korea provided on Thursday it would notably boost-up the building of new houses across the country in approaching years to handle surging home prices, a plan that would raise the number of dwellings in Seoul by 10%. President Moon Jae-in’s government said it will construct 830,000 new homes by 2025 across the country, 320,000 of which will be in Seoul.
The count is the 25th by the left-leaning Moon administration to lower soaring home prices and comes as both sales and rental prices rise provided the problem is caused by the tighter loans curbs and heavier real estate taxes.
The move provided the policy focus is shifting to rising supply after efforts to lower demand through loan curbs and taxes failed to calm the market.
Stocks of Korean building companies rose, with concrete parts maker Tongyang Pile surging 6.7% while Sampyo Cement and Ssangyong Cement Industry rose 3% and 2%, respectively.
The runaway home prices have dropped out a rush in President Moon’s approval ratings from the handling of the COVID-19 pandemic, and are freezing on his party’s support ahead of April elections to get the mayors of South Korea’s two largest cities, Seoul and Busan.
Resident Moon’s Democratic Party is fighting to gain both offices as the main opposition conservatives pick up a drive with criticism of his failures to deliver on his economic policy pledges.
“It’s some serious supply that will be enough to address any fears about home shortages,” said Yeo Kyoung-hui, a property market analyst at Real Estate 114 Inc.
“But until the government comes up with a list of specific suburbs and compensations for native residents who will need to move out for new construction projects, the number looks vague.“
As each measure has broken down and backfired on Moon’s approval rating, policymakers have said the unexpected rise in the number of people living single could provide the take-off of the demand for homes.
Between 2016 and 2019, the number of single-person homes raised by 13% to make up about a third of all households, while the population of the nation edged up to 1.2% to 51.8 million, Statistics Korea data provided.
South Korea’s population decreased in 2020 for the first time on record and is provided to decrease faster as its fertility rate is the lowest in the world.
“Stabilising the real estate market is a top priority, not just because we need to stabilize asset prices but also for housing welfare, to address income inequality and keep workers motivated and society stable,” Finance Minister Hong Nam-ki said in a policy meeting.
Thursday’s measure contains relaxing rules round off the height of buildings in downtown areas and loosening regulations on the rebuilding of the old apartments, to incentivize the conversion of low-rise villas into high-rise apartments that can give shelter for more families.
State-run developers will take construction projects from gaining land to applying for building permits, and the government hopes to decrease the length of those processes to about 5 years from 13 years recently.
The median apartment price in Seoul surged to 1.04 billion won ($929,351.42) as of January, up about 70% since Moon took office in 2017. ($1 = 1,119.0600 won).