The government has emphasized the need for increased housing supply and speed in its 9.7 and 8.13 measures, but construction bottlenecks continue to hinder progress. Public sector delays stem from lengthy land compensation processes, while the private sector faces challenges due to rising construction costs and tightened project financing conditions.
Public Sector Faces Procedural Delays, Private Sector Struggles with Viability
According to the real estate industry on September 7, the speed of public housing projects largely depends on how much time can be reduced in pre-construction procedures, such as land acquisition and compensation. Even when land is included in supply plans, various steps, including negotiations with landowners, must be completed before construction can begin.
Seojin Hyung, a professor at Kwangwoon University, stated, “The problem lies in the lengthy compensation period during the land development process. Since land compensation requires negotiations with landowners, if they refuse to sell, the timeline inevitably extends.”
Ham Young-jin, head of the real estate research lab at Woori Bank, noted, “Ultimately, the speed at which local governments and the Korea Land and Housing Corporation (LH) can act is crucial. Reforms and functional changes within LH could also impact future supply speed.”
For private housing supply, project viability and financing conditions are key. With ongoing burdens from construction and financing costs, many projects are unable to move from permitting to actual construction.
Ham added, “The biggest obstacle for private housing projects transitioning from permitting to construction is project financing loans. As funding becomes more difficult and interest burdens increase, many projects are unable to proceed.”
Seojin Hyung, a professor at Kwangwoon University, stated, “The problem lies in the lengthy compensation period during the land development process. Since land compensation requires negotiations with landowners, if they refuse to sell, the timeline inevitably extends.”
Ham Young-jin, head of the real estate research lab at Woori Bank, noted, “Ultimately, the speed at which local governments and the Korea Land and Housing Corporation (LH) can act is crucial. Reforms and functional changes within LH could also impact future supply speed.”
For private housing supply, project viability and financing conditions are key. With ongoing burdens from construction and financing costs, many projects are unable to move from permitting to actual construction.
Ham added, “The biggest obstacle for private housing projects transitioning from permitting to construction is project financing loans. As funding becomes more difficult and interest burdens increase, many projects are unable to proceed.”
Government's New Measures Aim to Alleviate Construction Bottlenecks
The government introduced the 8.13 rapid supply measures ahead of the one-year anniversary of the 9.7 measures to address these bottlenecks. The government plans to reduce the time from the announcement of new public land sites to construction from 68 months to 37 months, a reduction of 31 months. For private projects, the government aims to encourage construction by expanding financial support through the Housing and Urban Guarantee Corporation (HUG) and the Korea Housing Finance Corporation (HF).
The key question is whether the reduction in procedures and increased financial support will lead to actual construction starts. Ham stated, “The 8.13 supplementary measures were designed for rapid supply, so the core issue is how much they can expedite construction. Support for project financing loans, direct assistance through purchases, and easing loan-to-value regulations for non-apartment rental businesses are all measures aimed at increasing supply speed.”
Reducing the time required for redevelopment projects is also crucial. Kim Sang-bong, a professor of economics at Hansung University, explained, “Redevelopment takes considerable time from designating maintenance zones to establishing associations and obtaining project approvals. Reducing the duration of each project phase is essential to shorten the overall time to actual supply.”
However, there are concerns that even with reduced procedures and increased financial support, attracting private participation will be difficult without solid project viability.
Seojin Hyung cautioned, “Just because the government announces policies doesn’t mean supply can occur as planned; the market conditions are also challenging. Even if corporate rentals are promoted, if profitability is not achieved, there will be no companies willing to participate, indicating limits to expediting construction through policy alone.”
Even if construction speeds up, there will inevitably be a lag before actual occupancy occurs. However, if pre-sales increase before occupancy, the effects of expanded supply may be felt in the subscription market and beyond.
Ham concluded, “No matter how much we push for speed, it will take time before it translates into tangible occupancy. Once construction begins and general sales start, those without homes may feel a sense of relief as supply increases, allowing them to experience the effects of expanded supply even before completion.”
The key question is whether the reduction in procedures and increased financial support will lead to actual construction starts. Ham stated, “The 8.13 supplementary measures were designed for rapid supply, so the core issue is how much they can expedite construction. Support for project financing loans, direct assistance through purchases, and easing loan-to-value regulations for non-apartment rental businesses are all measures aimed at increasing supply speed.”
Reducing the time required for redevelopment projects is also crucial. Kim Sang-bong, a professor of economics at Hansung University, explained, “Redevelopment takes considerable time from designating maintenance zones to establishing associations and obtaining project approvals. Reducing the duration of each project phase is essential to shorten the overall time to actual supply.”
However, there are concerns that even with reduced procedures and increased financial support, attracting private participation will be difficult without solid project viability.
Seojin Hyung cautioned, “Just because the government announces policies doesn’t mean supply can occur as planned; the market conditions are also challenging. Even if corporate rentals are promoted, if profitability is not achieved, there will be no companies willing to participate, indicating limits to expediting construction through policy alone.”
Even if construction speeds up, there will inevitably be a lag before actual occupancy occurs. However, if pre-sales increase before occupancy, the effects of expanded supply may be felt in the subscription market and beyond.
Ham concluded, “No matter how much we push for speed, it will take time before it translates into tangible occupancy. Once construction begins and general sales start, those without homes may feel a sense of relief as supply increases, allowing them to experience the effects of expanded supply even before completion.”
* This article has been translated by AI.
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