President Lee Jae-myung takes a question from a participant at a public debate on real estate policy held at KBS in Yeouido, Seoul, on the 23rd. Cheong Wa Dae Press Corps
President Lee Jae-myung called delays in breaking ground on third-phase new towns and other previously announced areas “a truly serious problem,” stressing the need to shorten the timeline for starting construction.
At a public forum on real estate policy on the 23rd, Lee said the government is internally reviewing a plan to conduct administrative procedures in parallel to cut the required period to less than half of the current level, in order to resolve the delays.
“It is a truly serious problem that construction is being delayed in previously announced areas, including the third-phase new towns,” Lee said. “Since it is said to take 60 months (five years), we are internally reviewing ways to cut that to less than half.” He added, “The administrative pace is far too slow. If necessary, we intend to change the rules, or reduce the time by running procedures in parallel instead of sequentially.”
The remarks came in response to a point raised by Ko Jong-wan, head of the Korea Asset Management Research Institute. Ko diagnosed the market as being in a “triple strength” phase, in which monthly rent, jeonse (a Korean lease system requiring a large lump-sum deposit instead of monthly rent), and sale prices are all rising simultaneously, and identified supply shortage as the biggest cause of the surge in jeonse prices. He cited a shortage of housing sites, delays in advancing the third-phase new towns, and construction costs that have doubled over five years as the background.
Relocation loans were repeatedly pointed to as the biggest bottleneck in revitalizing redevelopment projects. Yang Ji-young, a senior analyst at Shinhan Investment & Securities, said, “In the Gangnam area, complexes take 8 to 10 years from management disposal approval to move-in.” She noted, “The increase from the previous 5 to 7 years is largely driven by rising construction costs along with the obstacle of relocation loans.” She explained that the Gangnam area can secure additional relocation loans thanks to top-tier construction firms, but other areas face significant difficulties as they must proceed with basic relocation funds alone.
Kim Jae-kyung, a redevelopment and reconstruction expert who runs the YouTube channel “Toomi TV,” also said, “If relocation funds are restricted simply because someone owns multiple homes, the relocation itself does not proceed.” He said, “The interest rate on additional relocation loans through the contractor’s credit guarantee is 6 to 8 percent, far higher than the 4 percent on ordinary loans. Combining relocation and demolition with the construction period, additional financing costs of at least tens of millions of won to hundreds of millions of won arise per union member.”
Voices also called for separate financing and institutional measures to support the supply of private long-term rentals. One presenter pointed out that while current real estate measures include private sales, public sales, and public rentals, plans for the supply of private long-term rentals are effectively omitted. “Rental operators cannot immediately repay even after securing construction funds, unlike with sales. Unless supplier financing is institutionalized, private rental supply will inevitably continue to shrink,” the presenter argued.
In response, Lee countered, “From the perspective of a private operator with a site for new construction, why would they offer rentals when sale demand and prices are high? The fundamental problem is that there are almost no sites available for new construction.” When the presenter again proposed that the government “should identify non-residential and idle sites in urban centers and foster them by offering benefits,” Lee replied, “We need to identify such sites,” and added, “I will take a look at it.”
A resident in his 30s from Seoul’s Nowon-gu also said, “When a low appraisal value limits the LTV to 40 percent, you can only borrow 100 million to 200 million won, making it as hard as picking a star from the sky to find a jeonse home,” and requested that the LTV be raised for the segment below 600 million won. An FSC official said the commission is reviewing a shift to using the planned new home as collateral instead of the existing home, and Lee also instructed officials to “find a realistic way to resolve the difficulties with relocation loans.”
On the effectiveness of easing regulations on reconstruction and redevelopment, Lee took a cautious stance, saying, “Reconstruction does not greatly increase the number of households, and redevelopment often actually reduces the total number of move-in households.” At the same time, he repeatedly said he would “look into” the difficulties with relocation loans, signaling his intent to move forward with concrete financial support for redevelopment projects.