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Finance minister warns of post-election housing market bubble

Finance Minister Hong Nam-ki speaks during a ministerial meeting to monitor the local real estate market, at the Government Complex in Seoul, Thursday. Courtesy of Ministry of Economy and Finance
Finance Minister Hong Nam-ki speaks during a ministerial meeting to monitor the local real estate market, at the Government Complex in Seoul, Thursday. Courtesy of Ministry of Economy and Finance

By Lee Min-hyung

Finance Minister Hong Nam-ki reiterated his strong willingness to minimize post-by-election instability in the local real estate market amid signs of a bubble in some speculation-prone areas.

"A satisfactory housing supply can never be achieved independently by the central or regional governments," Hong said during a ministerial meeting. "I hope the central government and local ones enhance cooperation in achieving this."

The message came a day after Oh Se-hoon of the main opposition People Power Party won the Seoul mayoral by-election, Wednesday.

For the past few weeks after being named as the sole candidate for mayor by the opposition party, Oh has stepped up criticism against repeated attempts by the government to tame soaring apartment prices by bolstering regulations on mortgages and hiking taxes on multiple home owners.

He pledged to ease tightened regulations on apartment reconstruction projects in Seoul, saying that housing supply ― driven by the private sector ― was crucial to stabilizing the overheated real estate market in Seoul.

The government, in contrast, has sought to boost the supply of apartments built by state-run enterprises.

Hong delivered the apparent message of warning to Oh that housing supply led by private builders can never be realized without support from the central government.

"There are signs of market instability in some areas due to certain campaign pledges made during the 2021 by-elections," Hong said. "Regardless of the ruling and opposition parties, both sides will share common ground in pushing for their real estate policies, and this is the stabilization of the housing market for the public."

But Hong and Oh are widely expected to escalate their conflict in their push for housing supply.

Oh's housing supply policy centers on providing 360,000 housing units in the capital city over the next five years by deregulating rules on reconstruction and widening redevelopment projects pursued by private builders.

Under the pledge, half of the target supply will be led by the private sector. Oh also pledged to loosen restrictions that limit the maximum height of apartments to 35 floors.

The so-called 35-floor rule was introduced by former Seoul Mayor Park Won-soon. This raises expectations that Oh will also be able to ease the rule using his authority.

The new Seoul mayor also plans to push for easing restrictions on floor area ratios, which will help speed up reconstruction and redevelopment projects across the capital area.

Oh's housing policy pledges, however, will likely collide with the central government. Hong reaffirmed his pledge to keep carrying out the government's much-hyped Feb. 4 housing supply policy, which will be driven by state-run organizations ― such as the Korea Land and Housing Corp. (LH).

"We will push for our housing supply policies as scheduled," he said. "The gist of the government's real estate policies ― such as deterring real estate speculation and eradication of unfair transactions ― should remain in place."

Kwon Dae-jung, a real estate professor at Myongji University, said chances remain slim for Oh to be able to achieve all of his housing pledges.

"It will be tough for the new Seoul mayor to ease tight restrictions on reconstruction or redevelopment during his 15-month tenure," the professor said. "He has to join hands with the government to find a middle ground for balanced housing supply policy."


Lee Min-hyung mhlee@koreatimes.co.kr


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