The South Korean government has set an ambitious target of supplying 1.47 million housing units in the Greater Seoul area by 2030, as part of its August 13 measures. However, experts warn that achieving this goal will require additional financial and tax incentives, given recent construction performance and private sector conditions.
The Korea Construction Industry Institute (KCI) stated in a report on August 30 that while the direction of the August 13 measures is positive for expanding supply, there is a need for better alignment among policy tools such as finance and taxation.
Under the August 13 measures, the government aims to add 120,000 units to the existing plan of 1.35 million units from the previous September 7 measures, bringing the total to 1.47 million units. This translates to an average annual supply of approximately 294,000 units in the Greater Seoul area. The additional supply will consist of 57,000 units from public land, 5,000 units from urban supply expansion, and 59,000 units from private financial and tax support and regulatory easing.
However, recent construction figures indicate that meeting this target will be challenging. In the first half of this year, housing starts in the Greater Seoul area totaled 65,000 units, which is only 24.2% of the annual target of 269,000 units set by the September 7 measures. In Seoul, the achievement rate is around 19.3%.
According to KCI, achieving the annual target of 294,000 units is ambitious. Over the past 16 years from 2010 to 2025, there were only four years—2015, 2016, 2017, and 2019—when housing starts in the Greater Seoul area exceeded 294,000 units. Last year, the number of housing starts was 167,000 units, which was only 56.8% of the target.
KCI analyzed that to meet the supply target, construction levels must exceed 1.5 times the recent five-year average of 181,000 units annually over the next five years. Notably, 83.4% of housing starts in the Greater Seoul area over the past five years were driven by the private sector, indicating that the government's ability to meet its supply goals is closely tied to the recovery of private housing projects.
Another concern is the lack of effective demand-side support measures. Most domestic housing supply relies on a pre-sale structure that utilizes buyers' funds, meaning that without effective demand stimulation policies, developers may struggle to secure financing for their projects.
KCI also referenced examples from Germany and the UK, which set annual supply targets of 400,000 and 300,000 units, respectively. Despite implementing demand stimulation measures, their supply achievement rates remained between 50% and 70%, highlighting the difficulty of meeting targets through supply expansion policies alone.
Furthermore, simply reducing administrative procedures for public land supply is not sufficient. The government plans to introduce a 'shortest construction model' to halve the land development period, aiming to start construction in new districts such as Gangseo in Seoul, Namyangju, and Gwangju in Gyeonggi Province within three to four years.
However, looking at the case of the third new towns, the time from the announcement of candidate sites to the start of initial land development took about 40 months for Incheon Gyeyang, while it took 54 to 57 months for Namyangju Wangsil and Hanam Gyosan. KCI emphasized the need for on-site management to identify and resolve delays based on the specific conditions of each district and block.
Urban redevelopment projects also remain a challenge. The government plans to lower the consent rate for redevelopment associations from 75% to 70% and expand urban public housing complex projects. While KCI views these measures positively, it pointed out that key issues affecting project viability, such as the excess profit recovery system and restrictions on the transfer of association member status, were not addressed in this plan.
Moreover, the legal cap on floor area ratio, which is currently applicable only to public redevelopment projects, raises concerns about equity with private projects. KCI suggested that incentives should be based on the public nature and outcomes of the projects, rather than whether the implementing entity is public or private.
Researcher Heo Yoon-kyung from KCI stated, “The August 13 measures present a clear direction for expanding supply to 1.47 million units in the Greater Seoul area during the term, which is positive. However, without effective demand stimulation measures supporting the pre-sale structure, the feasibility of the supply roadmap may be constrained.”
He added, “For public land, it is essential to address on-site bottlenecks such as compensation and relocation, while urban redevelopment projects must resolve key issues affecting project viability. The success of the August 13 measures will depend on reconciling conflicting policies and interests under consistent principles and ensuring that individual projects can proceed to actual construction swiftly.”
* This article has been translated by AI.
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