[EDITORIALS]Expanding the housing supplyThe government has announced a plan that aims to prevent a jump in housing prices in the Pangyo new town area: Sales will be delayed until November so that 20,000 units can be put on sale at one time.
The unit sales price of medium- to large-scale units will be lowered to below 15 million won ($14,630) per pyeong (3.3 square meters) by selling them through a public tender in which bidders specify not only the bid prices but also the amount of housing bonds they will buy if they win the bidding.
The government expects the new measure to cool down the overheated demand for Pangyo apartments and stabilize apartment prices in the neighboring districts. It can curb the apartment price rise temporarily, but it will not stabilize housing prices fundamentally. We have warned that lowering sales prices artificially has the danger of distorting the real estate market and inducing speculation.
The so-called parallel bidding system, in which the price for land that construction companies pay to the relevant authorities is raised, while housing unit sales prices are kept low, only has the effect of transferring the construction companies’ profit to the winners of the bidding. In return, the possibility of improper construction work and lower housing quality increases.
We have repeatedly emphasized that the solution to price stabilization should be found not in artificial control of sales prices but in an expanded supply of housing units. When demand is strong regardless of high prices, the housing market can’t be controlled by a low sales price.
In that sense, the plan to expand supply by developing new towns, on a par with Pangyo, at Okjeong in Yangju, Beollae in Namyangju and Samsong in Goyang, is desirable. The reason buyers are rushing to Pangyo is that the demand for convenient housing is so high. The high demand must be solved by an increased supply of good quality housing. The new towns developed in the future should be upgraded, in terms of accessability to Seoul and educational conditions, to the level of Pangyo. Besides three new towns, more places with conditions comparable to those of Pangyo should be developed.
It takes time to provide good quality housing. But if the government clings to a short-term measure of controlling sales prices through regulation, it will fail to calm down soaring housing prices and the psychology of real estate speculation.