A 182.95-square-meter unit in the Sinhyundai 12th complex in Apgujeong-dong, Gangnam-gu, Seoul, sold for 11.25 billion won on the 4th of last month. That was 250 million won higher than the 11 billion won it fetched on April 29, just before the moratorium on heavier capital gains taxes for multiple-home owners ended. An 84.98-square-meter unit in Raemian One Bailey in Banpo-dong, which traded at 7.15 billion won last August, fell to as low as 5.45 billion won this year before selling for 7.15 billion won in late May, erasing the decline within a year. It offers a glimpse into an ultra-high-end housing market that shows strong resilience even under the pressure of heavier capital gains taxes.
Some view apartments priced at around 200 million won per 3.3 square meters as abnormal, but expensive homes exist in every country. When housing supply is limited in areas with excellent schools, transportation, and living amenities, prices rise. The ultra-high-end housing market, where higher property-holding taxes can be offset by rising asset values, is unlikely to be greatly shaken by tax reform.
The government's housing and real estate policy need not target ultra-high-end apartments in Gangnam's three districts. It is enough to levy taxes commensurate with high-priced homes. If the government's policy goal is "to normalize the market rather than to bring down prices," it is more effective to supply substitutes and complements quickly and steadily in areas with high demand, rather than to shake up the existing ultra-high-end market.
Market expectations are not high for the housing supply measures that the government, which has declared "just supply," is set to announce soon. The market's attention is focused entirely on tax reform and the easing of lending regulations. Indeed, the real estate market and housing buyers have given poor marks to the September 7 measures of last year and the January 29 measures announced this year. Home prices surged after the September 7 measures were announced because the government's housing supply plan failed to meet the market's expectations. The January 29 measures, assessed as a "leveraged-to-the-hilt package," included many prime sites such as the Gwacheon Racecourse, but because actual supply takes time, they have limits in calming the rise in home prices and cooling home-buying demand. Moreover, the core supply sites included in the January 29 measures are slow to progress amid resident opposition and disagreements from local governments.
As President Lee Jae-myung has lamented, land available for additional housing supply is limited in Seoul and the wider metropolitan area. Building additional new towns, which would deepen the concentration in the metropolitan area, is difficult. The best option is to build faster by accelerating existing new town construction plans and the development of idle urban land. In addition, the government should ease the frozen project financing (PF) market and, through stronger policy fund support, seek to revitalize the non-apartment market and expand the supply of public rental housing. It is regrettable that projects failed to gain momentum because the top post at the Korea Land and Housing Corporation (LH), the entity responsible for public housing supply, was vacant for about 10 months. Even now, the government should hurry to finalize its restructuring plan and put its foot on the gas for the third-phase new town projects.
Above all, the central and local governments should cooperate. Because expanding housing supply through redevelopment projects has a large effect, there is a need to ease regulations such as restrictions on relocation-cost loans, so that redevelopment and reconstruction in urban areas can pick up speed. Easing relocation loan regulations is something the Seoul Metropolitan Government has consistently demanded of the central government. Cooperation between the government and Seoul is also needed to make use of semi-industrial areas to expand urban housing supply, because the ratio of industrial land to be secured according to the factory ratio must be adjusted. This requires amending ordinances. Although the Democratic Party of Korea holds a majority in the Seoul Metropolitan Council, it must secure the cooperation of local governments and autonomous districts in the process of amending ordinances and drawing up district unit plans. The same goes for lifting greenbelt restrictions. If there is a justification of prioritizing supply to housing-vulnerable groups such as young people and newlyweds, local governments too will cooperate in the process of lifting greenbelt restrictions.
Even if political positions and policy philosophies differ, before the proposition of stabilizing housing for ordinary people, I would like to see the ruling and opposition parties and the central and local governments yield and compromise rather than weigh their gains and losses. It is time for the government and local governments to join forces to restore the housing supply ecosystem damaged by the PF market freeze and a prolonged economic slump. To "just supply," one must "just cooperate."
