Gov’t slashes number of new housing unitsTaking into consideration the country’s years-long stagnation in real estate, the government has decided to approve construction of 37 percent fewer houses this year than last as it changes the focus of housing policy to boosting demand.
The Ministry of Land, Infrastructure and Transport yesterday said it will approve construction of 370,000 houses this year, down 217,000 from last year.
It is the smallest number approved since 2003, when the government started to set an annual housing plan. Until 2008, the government approved about 500,000 new houses every year. But from 2009, the number was cut to between 400,000 and 450,000.
“The new focus of the housing plan will shift to demand, considering that actual demand for houses has been on a continuous decline,” the ministry said in a statement.
The ministry recently predicted that demand for houses would decrease between 390,000 to 400,000 annually for the next 10 years.
Prices of apartments across the nation continued to drop for the fourth-straight week. Prices for apartments in Seoul fell 0.1 percent this week compared to the previous week, with those in three expensive areas - Gangnam, Seocho and Songpa - falling 0.1 to 0.2 percent.
Of the 370,000 approved new houses, 220,000 are in the Seoul metropolitan area. The total number includes construction of 68,000 public rental houses and 10,000 public houses available for purchase. The government earlier said an oversupply of public houses has been a cause of the stagnation in home transactions. Last year, 52,000 public houses were approved for construction.
The number of new houses scheduled to be completed this year is 355,000, slightly down from 365,000 last year.
There are 56,000 public houses ready this year. It is the first time the government revealed the numbers of public houses in the housing plan.
“What immediately affects the market this year is the number of houses to be completed soon,” a ministry official said. “The government will start looking at the number of newly built houses more closely in order to predict demand more accurately.”
The construction industry responded negatively to the announcement.
“The measure is going to extend the current stagnation and shrink the housing market,” said a spokesman for Samsung C&T. “Contraction of the housing market would also lead to reduction in business at many local builders.”
“We don’t really care about the government policy, the local housing market is so bad that major construction companies are already out of it,” said an employee at another local builder.
BY SONG SU-HYUN [email@example.com]