Government Planning More New Towns

The government will announce this month its plans to create another inner city “new town,” while increasing the size of a preexisting new town.

The plans will create one or more new towns roughly the size of Bundang New Town in Seongnam (5,940,000 pyeong) during the first half of 2007.

The Minister of Construction and Transportation Choo Byung-jik opened a press conference on October 23, saying, “To prevent anxiety about housing prices, along with promoting the previous real estate general policy, we are planning to build a new town the size of Bundang in the metropolitan area and increase housing.”

Without revealing the proposed site, Choo said, “The new town will not be in the greenbelt area, and by making the population density lower and more pleasant, we hope to lure in the consumption from Gangnam, Seoul.”

The ministry housing policy team supervisor Park Sun-ho explained, “Within October, the new town site and to-be expanded new town will be released. When negotiations finish in the related ministries in the first term of next year, the Bundang-sized new town sites will be announced.”

This government measure intends to expand supply after the previous government real estate policies, which were weighed heavily on taxation and other consumption-reducing policies, have reached their limit.

Of the sites that will be announced in detail this month, the housing supply of the expanding new town is forecasted to be possible by 2009, the housing supply for the ‘new’ new town by 2010.

The sites that the ministry is now reviewing will have to be located 50 to 60 kilometers away from Seoul, and the possible cities are Incheon near the second outer-city beltway, Geomdan-dong of Incheon, Icheon, Pocheon, area between Gwacheon and Anyang, Gwangju, and Yongin in Gyeonggi Province.

The possible candidates for the expanding new town are Dongtan new town in Hwaseong and Unjeong new town in Paju, Gyeonggi Province.

Choo also said, “The floor space index (the ratio of building area versus land mass) of the privately-owned land in the non-city managed areas (formerly farmland) will be adjusted upward from the current 150 percent. The regulations on construction such as the popular multiplex house parking lot will be relaxed so that the supply of materials will increase in Seoul areas.”

“We have no plans whatsoever to lift the regulations on reconstruction in Gangnam, Seoul,” he added however, clearly seeing the continuation of the reconstruction control on Gangnam.

Choo emphasized, “The recent housing price anxiety is happening because the August 31 general real estate taxation and two-house-per-family taxation which will start next year are not yet realized. If you buy a house now it will be expensive, so just wait until good-quality housing is supplied and trust your government.”

Experts are at a crossroads on the government’s housing supply expansion policy.

Some predicted the effect of securing housing prices in the long run when the previous real estate policy turns its focus from demand constraint to supply expansion and balance

Meanwhile, others pointed out the possible side effects of rising land and housing prices in the inner-city area due to the announcement of a halfway development plan.

higgledy@donga.com abc@donga.com