[비즈한국] On September 11, during his 100-day inaugural press conference, President Lee Jae-myung commented on his government’s recent housing supply measures, stating, “The fact that there is neither praise nor criticism suggests we have done well.” On the surface, this sounds like a “stable policy without political repercussions.” However, the real estate market does not move based on applause or boos; it moves based on cold, hard indicators: the flow of processes (permits–construction–pre-sales–completion), the delinquency and refinancing of project financing (PF), the accumulation of unsold units before and after completion, and the friction between household credit and the debt service ratio (DSR).
The President's self-assessment reinforces a short-term psychological frame that “preventing price spikes is enough.” However, what currently puts the Korean housing market at risk is not the price itself, but the distortion of the system that supports those prices. Unless the criteria for evaluating policy are shifted from the thermometer of public opinion to the dashboard of the system, the field will become increasingly anxious, no matter how much the government claims it has “done well.”
On September 7, the government unveiled its “Housing Supply Expansion Plan,” proposing the construction of 1.35 million units in the metropolitan area by 2030 (270,000 units per year) and stating that the Korea Land and Housing Corporation (LH) would directly execute public housing projects to speed up the process. It also announced plans to increase supply by converting urban resources such as aging public offices, school sites, and unused state-owned lands. The direction is right. However, numbers are merely promises. Supply depends not on the total volume on blueprints, but on the sustainability of the production system. Promises only become performance when four wheels—money (financing structure), people (construction capacity), regulations (permits, environmental and traffic impact), and demand (pre-sales and conversion)—turn simultaneously. In the current environment, none of these four wheels are turning automatically.
First, the front end of the process is shaky. Looking at housing statistics from July, pre-sales in the metropolitan area saw a brief uptick, but cumulative performance lagged compared to the previous year. Most importantly, unsold units after completion, categorized as “malignant,” have increased again. A structure where the front end (permits/construction) is imprecise and the back end (unsold units after completion) piles up results in a bottleneck that exacerbates regional supply cliffs and price volatility 1 to 3 years down the line. Even if the government shouts about supply figures, the reality on the ground is that the phrases “no money to start construction,” “no certainty of sales,” and “don’t know when permits will end” are stopping people and equipment in their tracks. If this gap is not bridged, “270,000 units per year” will remain a plan that exists only on paper.
Second, the embers of PF stress have not been extinguished. The liquidity crisis of construction companies has spread into a burden for the entire institutional financial system, to the point where the speed of court-ordered rehabilitation proceedings is accelerating. This year, applications for court receivership by mid-sized and small construction firms have followed one after another, and even companies that had previously graduated from workouts have returned to rehabilitation procedures. This is not merely a failure of individual companies, but a sign of structural cracks involving unsold units, rising costs, and delayed revenue recognition. Unless the risks surrounding the seniority (senior, mezzanine, junior debt) of PF are precisely rearranged, the “construction start button” will not be pressed, no matter how many permits are issued or floor area ratios are increased. The market looks at balance sheets, not numbers.
Third, households are gasping for air. According to Bank of Korea statistics, the household credit balance at the end of the second quarter reached an all-time high of 1,952.8 trillion won. Coinciding with price rebounds in some regions, mortgage loans are swelling again, leading to a strange phase of “debt expansion without transaction recovery.” In this environment, the government’s repeated message of “demand suppression” creates a paradox. While indiscriminate suppression may prevent short-term spikes, it blocks the replacement and transition of real demand, drying up the veins of transactions. When the channels for transactions dry up, PF recovery, absorption of unsold units, and conversion to rentals are all blocked, leading to accumulated systemic fatigue. A soft landing is possible only through selective buffering, not suppression.
Fourth, the qualitative deterioration of the rental market is eroding economic sentiment. As the transition from jeonse (lump-sum deposit) to monthly rent accelerates structurally, the scars of deposit insurance accidents remain, and the increase in unsold units after completion fuels distortions in the rental market. Unless a chain-linked design of “guarantee-supply-rent”—such as insurance fees, warnings for high-risk complexes, and rapid purchase or conversion to public rental REITs—is strengthened, the general public’s perception of housing security is likely to worsen, regardless of how much the government claims to be “managing prices stably.” The discrepancy between “stable” average prices and the “anxiety” of daily life is already emerging.
Fifth, the gap in the metropolitan-centered prescription is widening. While the government's focus on the metropolitan area is a politically and administratively understandable choice, the continued sluggishness of permits and construction in non-metropolitan areas accelerates the hollowing out of regional economic zones. Housing is a package that combines industry, transportation, education, and residency. If only housing is supplied without the simultaneous expansion of jobs, schools, and living infrastructure (SOC), the population will be sucked into the metropolitan area even faster. As the government said, “We cannot build new towns indefinitely,” the solution lies not in the number of new towns, but in redesigning location strategies for metropolitan units. Along with the “total volume” announcement for the capital region, a blueprint for rearranging transportation, industrial complexes, and education axes to enable the survival of non-metropolitan areas should have been presented. The current message hovers in mid-air between promises and a blueprint.
The core that penetrates all these risks is that the government defines the effectiveness of its policy only as “price stability” and underestimates “system stability.” The President’s declaration that “there should be neither crashes nor spikes” is reasonably correct, but the technical foundations that make such a declaration possible (PF structural reform, resolution of permitting bottlenecks, orderly absorption of unsold units, and redesign of guarantees/rentals) are slower and more complex than declarations. If policy is judged by the public opinion standard of “there is neither praise nor criticism” without filling that gap, the trust that “policy leads the market” weakens, leaving only “market observation.” Where trust is absent, information asymmetry and speculative betting flourish. What is needed now is not words to persuade the market, but figures that move the market.
So, what must change? First, a reconstruction of the KPI (Key Performance Index) is urgent. Instead of media reactions, the government should disclose monthly and regional data on permits, project approvals, construction starts, pre-sales, unsold units after completion, PF delinquency/refinancing speeds, transaction conversion rates, and rental guarantee accident rates. Hiding numbers fuels fear; showing them builds trust.
Second, a standard PF structure must be institutionalized. The risk-sharing and requirements for senior (banks/insurance), mezzanine (policy finance/guarantees), and junior (private capital) lenders must be codified, and liquidity bridges and refinancing before and after pre-sales must be automated for projects that pass feasibility studies, allowing the “start button” to be pressed again.
Third, parallel reviews of permits and mandatory compliance with deadlines must be enforced, and a standard model for small-scale maintenance and remodeling should be disseminated to boost micro-supply in urban centers.
Fourth, for unsold units after completion, tracks for conditional public purchase and rental REIT conversion should be operationalized at all times, with clear rules to prevent market price distortion.
Fifth, a rebalancing of demand regulation is needed. More precise suppression should be applied to multi-homeowner leverage and short-term flipping, while selective buffering of DSR and acquisition taxes should be opened for productive transactions such as replacements for single-home real demand, childbirth, labor mobility, and energy efficiency improvements to keep the veins of transactions flowing. Only when these five factors work simultaneously will “total volume targets” become “field performance.”
The method of policy communication must also change. Saying “we will repeatedly issue countermeasures” causes fatigue in the market. It must be not more frequent, but more precise. Each measure should clearly state which process bottleneck it reduces by how much, and which financial indicators it changes in which quarter. For instance, “270,000 units per year” is a target; intermediate indicators such as construction start rate (relative to permits), pre-sale rate (relative to construction starts), absorption speed of unsold units, and PF refinancing success rates must be designed like steps to reach that target. The market does not wait for the “next measure.” Capital and people move tomorrow based on the credibility of the figures released today.
The President speaks of a “great financial transformation that shifts funds from real estate to high-tech industries and daily economic activities.” The direction is correct. However, if systemic instability in the housing market is not resolved, households will become more sensitive to risk, and funds will condense further into safe assets. Ironically, a soft landing for the housing market is a prerequisite for moving away from a “real estate-centered economy.”
Only when housing is stable can households afford long-term investments, allowing finance to flow into technology and industry. The art of a soft landing is engineering, not slogans. It requires a delicate design that meshes the four gears of finance, permits, supply, and rental; transparent figures that enable such a design; and sincere updates of those figures.
Governments change, but self-praise remains. The phrase “there is neither praise nor criticism” might be a self-suggestion repeated by every administration. However, the housing market does not move to such spells. What moves the market is not public sentiment but samples, not slogans but processes, and not charity but balance sheets. If the Lee Jae-myung administration truly wants to be evaluated as having “done well,” it must show calm improvement in the indicators that the market looks at every month.
Solving permitting bottlenecks, turning the engine of construction, extinguishing the embers of PF, reducing unsold units, and decreasing rental guarantee accidents—these are the only pieces of news the Korean housing market is waiting for. What is needed now is not a louder voice, but a more accurate dashboard. And it is about accelerating in the same direction while watching that dashboard.
Kim Hak-ryul, the head of the Smart Tube Real Estate Research Institute known by the pen name 'Pasyong,' served as a team leader at the Korea Gallup Real Estate Research Division. He operates the Naver blog ‘Pasyong’s World Exploration’ and the YouTube channel ‘StueTV.’ He is the author of several books including ‘The Power of Gyeonggi Real Estate (2024),’ ‘Absolute Principles of Seoul Real Estate (2023),’ ‘The Future of Incheon Real Estate (2022),’ ‘Kim Hak-ryul’s Absolute Principles of Real Estate Investment (2022),’ ‘Future Map of South Korean Real Estate (2021),’ ‘From Now On, Only Places That Rise Will Rise (2020),’ and ‘South Korea Real Estate User Guide (2020).’