Fog of war on property leaves market dazed and confused

View of Jamsil, Songpa District, southern Seoul. Apartment prices in the neighborhood increased sharply despite government measures to cool housing prices. [YONHAP]

Mixed messages from the government on the property market are further muddying the already muddy real estate waters.

Measures have been talked up left and right, some announced and some leaked, ranging from the adjustment of the maximum floor ratios to the opening of some protected land for the building of apartments.

To make matters worse, much of what has been said has been denied, confusing a market seeking some direction, with the Finance Ministry and Land Ministry seemingly speaking without coordinating with the other.

Earlier this week, Finance Minister Hong Nam-ki said the government will be rolling out supply plans later this month.

Then on Friday, the Land Ministry denied a report that it was looking into expanding the floor area ratio of reconstruction projects in Yongsan, a 510,000-square-meter (126-acre) plot in the center of Seoul. The JoongAng Ilbo on Friday cited a high-level government official who said that the government was looking into raising the floor area ratio to a maximum of 1,500 percent.

Under current zoning rules, the maximum floor area ratio, which is the floor area divided by the size of the property on which the proposed building will sit, is at 500 percent.

The land was to become an international commercial district but is now set to become a small new town.

The high-ranking government official told the JoongAng Ilbo that the changes will increase the supply of apartments from 8,000 to 20,000 units.

In a news appearance on July 14, Finance Minister Hong said that protected greenbelt areas in Seoul could be developed. Greenbelt zones are not supposed to have buildings, for environmental and defense reasons.

President Park Chung Hee in 1971 was the first to harvest these areas for housing. The Roh Tae-woo administration lifted the restrictions on some of these areas in preparation for the Seoul Summer Olympics in 1988.

A day after Hong's announcement, Vice Land Minister Park Sun-ho stressed that the government was not considering greenbelt conversion.

“The government has not reviewed the proposal, and we have not started any negotiations in regards to this issue with the Seoul [city] government,” Park said. “While greenbelt's purpose is to protect the environment, it is a system that also limits reckless expansion of the city.”

The Seoul government has also been strongly opposing the lifting of greenbelt restrictions.

On Friday, the Blue House put its foot down on the issue, with Blue House policy chief Kim Sang-jo saying that it is the position of the president and the Democratic Party to review the greenbelt proposal.

“The goal of the government is to resolve issues,” Kim said. “[The role] is to adjust the difference between the central and local government and to also ease opposition from the local residents.”

The need to increase the supply of housing has become a key focus for the administration since the 21st antispeculative measure was announced in June. As the measure could end up restricting the development and redevelopment of properties, it could actually have the effect of driving up prices.

President Moon, according to the Blue House, ordered Land Minister Kim Hyun-mee to come up with plans that would increase supply and put pressure on people owning more than one property.

A 22nd set of measures was announced earlier this month, but the issue of supply remained unaddressed.

In May last year, the government announced a plan to supply 300,000 apartments by building three new towns around Seoul. But the number of units was not seen as sufficient.

President Moon re-emphasized during his speech at the National Assembly on Thursday the need to employ all necessary means to stabilize housing prices and suppress speculation. He said the government will actively look into plans that would increase housing supply.

The real estate market continued to show little signs of cooling despite the government's latest measures.

This week, apartment prices rose 0.15 percent compared to the previous week, the same rate as the previous week. Seoul apartment prices on average rose 0.13 percent, slightly up from the 0.12 percent the week before.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]