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| ▲ The government promotes reconstruction and redevelopment projects directly implemented by the public to dramatically increase the supply of housing in large cities such as Seoul. For station areas, semi-industrial areas, and low-rise residential areas, the government directly designates districts, and public institutions lead the projects. The picture shows a real estate brokerage office in Seoul on that day with information related to redevelopment counseling. | |
| Ⓒ Yonhap News |
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Whether it’s real estate or stocks,’long-term investment’ is a kind of success formula. It’s a well-known formula, but few people keep investing without being shaken in the face of any storm. That’s why the one who resists the temptation to’throw in the middle’ is often the final winner.
The same is true of the Moon Jae-in government that it will not tolerate real estate speculation. On the 4th, the rumors were delivered to speculators who did not yield to government pressure and endured with reconstructed apartments.
In the case of public reconstruction projects, the reconstruction excess profit return system is exempted, and a housing supply plan has been proposed that provides priority supply of rebuilt apartments even if the two-year living requirement is not met. The government even issued an unconventional guarantee that’the government guarantees’ more reconstruction profits than expected.
This is one of the good news in the reconstruction market. This is a measure that makes anyone who owns real estate laugh at this point.
Speculators who succeeded in pulling out the stem
First, shall we look at the reconstruction excess return system? The reconstruction excess return system was like a’snail’ for reconstruction speculators.
This system is a system in which the government levies and recovers excessive reconstruction profits after subtracting development costs. To be more precise, it is a system that is imposed when the reconstruction income is more than 30 million won (per household) after subtracting the average increase in neighboring house prices and development costs. Up to 50% of the revenue is redeemed by the government. It is one of the devices that block unearned income from sitting as real estate.
This system was introduced in 2006 during the Roh Moo-hyun administration. However, the Lee Myung-bak administration temporarily delayed the implementation of this system as of December 2012, saying, “We must save the construction industry.” And it has been revived again from January 2018 during the Moon Jae-in administration. Of course, the backlash of speculators was fierce and led to unconstitutional lawsuits. The Constitutional Court managed to survive by making a’constitutional’ decision in December 2019, but the excess profit redemption system has continued to shake.
However, in the housing supply measures announced that day, it was decided not to apply the excess profit return system when participating in the public reconstruction project. This has opened the way for speculators to maximize their speculation profits. In addition, you do not have to meet the two-year living requirements, which are supposed to apply to rebuilt apartments. In other words, the owners of Eunma Apartments no longer have to endure “eating rust”. Speculators who have invested in old apartments such as Eunma apartments can now move to a penthouse and wait slowly while receiving jeonse.
Minister of Land, Infrastructure and Transport Byun Chang-heum answered at a briefing on the day that “it is a project conducted by the public, so the excess profit redemption system is exempted”, but I am not sure how to decide on a public project. Is the business public and the money speculators eat public business?
Government that guarantees excess returns
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| ▲ Minister of Land, Infrastructure and Transport Byeon Chang-heum is entering a party-political discussion on a plan to dramatically expand the supply of housing in the metropolitan area held at the National Assembly Assembly Hall on the 4th. | |
| Ⓒ Joint coverage photo |
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Not only this. The government professed, “We guarantee a return of 10~30%p higher than the expected return for reconstruction of the existing method.” The government, which does not guarantee the principal of bank accounts of 50 million won or more, has written a guarantee that it will guarantee profits to reconstruction speculators. No matter how urgent the supply of housing is, it cannot but be questioned whether the government’s role is to guarantee the profits of speculators with national taxes.
The government said that it would return a certain portion of the volume secured by raising the floor area ratio and supply it as public housing. The specific figures will have to be weighed by business location, but how much of the remaining public housing can be secured while thoroughly guaranteeing speculator profits? Much of the increase in the floor area ratio, etc., has no choice but to return to securing speculative returns.
In the data, out of the 830,000 units supplied by this measure, the specific number of public housing units has not been properly counted. Even if the government promises to increase the reconstruction profits higher than the current expected profits and applies the pre-sale price limit, we cannot guarantee that the prices of these public housing will be affordable enough for the common people to bear.
The countermeasures only say’payable’ public housing. I am concerned that newlywed couples in their 20s and 30s will sell 600 million to 700 million won worth of honeymoon hope towns that are difficult to handle and take the train that was said to be’cheaper than the market price’. If you look at page 14 of this countermeasures data, it was said that it would increase the’share of special supply under 900 million won’, but you may be complaining that it is cheaper than the market price after setting the sale price near 900 million won. I hope you are lean.
Final winner
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| ▲ On the 4th, when the government announced its 25th real estate countermeasure, a real estate agency in Seoul is watching the news. The government promotes reconstruction and redevelopment projects directly implemented by the public in order to dramatically increase the supply of housing in large cities such as Seoul. By 2025, it aims to supply 836 thousand houses nationwide, including 320,000 houses in Seoul alone. | |
| Ⓒ Yonhap News |
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The real winners of the government’s housing supply measures are those who currently have a stake in rebuilding apartments and redevelopment. This is thanks to diligently buying the land while not listening to former Minister of Land, Infrastructure and Transport Kim Hyun-mi, who said “I will not tolerate speculation.” Comprehensive real estate tax is rising. Compared to expected profits, it is the level of blood for new feet, so you just pay. Many speculators are registered as’rental companies’ early and are exempted from tax.
Since 2017, they have listened to the insulting words of’speculation forces’ for a long period of time, and even registered as a rental business operator despite the pressure to’sell a house’, and eventually, they were able to earn reconstruction profits under government guarantees.
The government has come up with several measures to prevent speculation. The government will not grant priority occupancy rights if real estate is bought or sold in the target area after the 4th of the announcement of the measures. Anyone who has bought a house or land for speculation after this day will have to pay cash at the start of the business. Even if you do cash liquidation, you will probably be able to take as much as the price of land has risen.
For this reason, experts predict that as the expectation for development in Seoul and other large cities has increased, the possibility of housing and land will rise further in the future. There must be a reason why the construction industry and the real estate industry, which had been disappointed whenever the Moon Jae-in administration announced real estate measures, received a welcome response.
An official at the bank who advises clients on real estate investments is “a clear boost.” This official predicted that the selling price would increase more not only in the station area, but also in Gangbuk, Seoul. If you translate the words of this official as it is, it is like this.
“In the Gangbuk area of Seoul, there were many apartments that were worried because they were not profitable, but if you participate in public reconstruction, those concerns will disappear and prices will rise. Those who invest in Gangnam for two years were also worried, but those concerns also disappear. I lost.”
I just pray for the government
The government’s intention is to calm down their’panic buying’ by giving a clear signal to the 3040 households, who are afraid of the constant rise in housing prices, that they will supply a large number of pre-sale housing that is cheaper than the market price. Through this, you will want to achieve stability in house prices by reducing the demand for immediate housing purchases.
However, there is no guarantee that good intentions will produce good results. In fact, in May last year, after the government announced a public redevelopment policy to increase the supply of housing through exceptional preferential treatment, multi-family and villa housing prices in Seoul have been steadily rising for the sixth month since June last year.
Even if the measures announced by the government are implemented smoothly, it will take at least five years to actually supply housing. We only hope that the government will be able to control the market so that the development craze that will occur in the metropolitan areas such as Seoul during this period does not lead to further increases in house prices. Good luck to the government.