With the conclusion of the June 3 local elections, discussions on housing supply, which had stalled during the electoral period, are expected to gain momentum. As negotiations between the central government and local authorities resume, conflicts surrounding key housing supply sites in the metropolitan area may reignite.
According to industry sources on June 7, the areas most likely to see renewed tensions between the government and local authorities are the Gwacheon horse racing track site and the Yongsan district. The government has proposed expanding supply by utilizing prime urban and metropolitan locations, but resistance from local governments and residents remains a significant variable.
In Gwacheon, concerns center around the burden of infrastructure such as transportation, education, and water supply. There are fears that adding more supply to an already developing public housing district could reduce local acceptance.
In Seoul, the continuation of Mayor Oh Se-hoon’s administration suggests that the existing supply strategy is likely to remain in place. Key elements include revitalizing reconstruction and redevelopment projects, easing regulations on maintenance projects, and enhancing project viability. The approach focuses on increasing supply through private redevelopment initiatives rather than direct public provision.
However, the pace of supply in Seoul is uncertain. Maintenance projects must navigate several steps, including establishing associations, obtaining permits, relocating residents, and commencing construction. Rising construction costs and the financial burdens on association members continue to pose challenges. Critics argue that in areas with low project viability, merely easing regulations may not lead to actual construction.
In Gyeonggi Province, the redevelopment of first-generation new towns is the top priority. Areas such as Bundang, Ilsan, Pyeongchon, Sanbon, and Jungdong are set to advance following their designation as leading districts. These regions face significant demand for redevelopment due to aging housing, but the speed of supply will depend on relocation measures and infrastructure improvements.
Simultaneous large-scale reconstruction could lead to instability in the rental market. If sufficient temporary housing is not secured, project timelines are likely to be delayed. Enhancements to essential infrastructure, including schools, roads, water supply, and parks, must also be coordinated. Simply increasing housing numbers by raising floor area ratios will not adequately meet local demand.
Public housing near transit stations and public-led redevelopment in urban centers are also emerging as key components of Gyeonggi's supply policy. However, in areas with low project viability, attracting private investment without public support is challenging. The financial capacity of local governments and the level of resident consent are also critical factors.
Supply indicators show mixed results. From January to April this year, housing permits decreased in both metropolitan and non-metropolitan areas. Conversely, construction starts and sales increased. While this may appear to signal a recovery in supply, completions—directly linked to occupancy—have significantly declined, raising concerns about future shortages.
The decline in permits could exacerbate long-term supply uncertainties. The increase in construction starts and sales does not guarantee stability. Typically, it takes several years for construction volumes to translate into completions. During this period, fluctuations in construction costs, financing expenses, and market conditions could delay projects.
Metropolitan cities require a different approach than the metropolitan area. Cities like Busan, Daegu, Daejeon, and Gwangju face significant demand for redeveloping aging residential areas and developing transit hubs, but they also contend with high unsold inventory. If supply increases solely based on the assumption of shortages, it could worsen market pressures.
Particularly in non-metropolitan areas, the increase in construction starts and sales could lead to a rise in unsold inventory. In regions with weak demand or prices exceeding buyers' affordability, new supply is unlikely to stabilize the market. There are calls to adjust supply speeds based on local population trends, industrial foundations, transportation networks, and pricing levels.
The construction industry is also adopting a cautious stance on expanding supply. The burden of rising construction costs remains, and the project financing market has not fully recovered. For permit volumes to translate into actual construction and completions, improvements in financial conditions and enhancements to project viability are necessary.
An industry insider stated, "The success of housing supply measures post-local elections depends not on the announced volumes but on their execution. In the metropolitan area, key variables include conflict resolution between the central government and local authorities, the pace of Seoul's maintenance projects, and relocation measures for first-generation new towns. In the regions, managing unsold inventory and tailoring supply to demand are crucial."
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.