Gov't looks to boost housing supply with more units, $14.8B investment

Finance Minister Choo Kyung-ho, center, outlines the government's plans on housing supply in a press briefing held at the government complex in central Seoul on Tuesday. [MINISTRY OF ECONOMY AND FINANCE]

The government on Tuesday vowed to supply an additional 120,000 public units and raise finance programs for the housing market by 20 trillion won ($14.8 billion) to offset concerns around declining housing supply.

The plans were announced as part of the long-term goal by the Yoon Suk Yeol government to supply 2.7 million units throughout his term.

The plans were released in a joint statement by the Ministry of Economy and Finance, the Ministry of Land, Infrastructure and Transport and the Financial Services Commission.

The additional units will be supplied in metropolitan areas and new locations yet to be announced. The list of potential locations is scheduled to be announced in November.

The government aims to supply more than a million units next year.

The government will “actively complement private supply in order to make sure houses are supplied without suspension and to speedily improve business conditions for private housing developers,” said Finance Minister Choo Kyung-ho in a press briefing held at the government complex in central Seoul on Tuesday.

“Housing prices nationwide have stabilized to the level seen in late 2020 and the market is being reorganized centered on the end users” instead of investors. Choo added, “The property market is generally showing signs of a soft landing, but price increases are seen in some regions.”

The presale housing, a barometer that measures confidence in housing markets, has recently improved but mostly in the greater Seoul area.

Additional measures to achieve the goal included shortening the approval procedure for housing supply by more than a year and encouraging a speedy reorganization of insolvent developers.

The government said the housing supply has started to weaken since the second half of last year amid a reduced number of housing approvals and delayed commencement of construction due to the weakened market sentiment.

The number of houses that were approved for construction in the first eight months of this year was 39 percent fewer than in the same period a year earlier. The number of houses that commenced construction was down 56 percent over the same period.

The government also vowed to raise the financial support for the housing market by around 20 trillion won to a total of 40 trillion won. Ten trillion won will be allocated for project finance loans and an additional one trillion won will be used for a fund designed to normalize project finance loans.

“The goal of the latest measures is to properly activate the market that has been entangled by aggravated business profitability [due to high interest rates and increased raw material prices] and regulations,” said the Minister of Land, Infrastructure and Transport Won Hee-ryong at the press event.

The plans were announced amid concern for rising household debt, which recently jumped as a result of an acceleration in home purchases.

Household loans extended by banks rose at the sharpest rate in more than two years in August. Banks’ outstanding household loans reached 1,075 trillion won in the month, up 6.9 trillion won from a month earlier, according to the Bank of Korea in a report on Tuesday.

BY JIN MIN-JI [jin.minji@joongang.co.kr]