(China Daily)
Updated: 2008-04-03 07:29

Homebuilders have so many apartment houses to unload on the market. Yet not many families can find affordable homes in residential districts they prefer. These problems often result from the regional mismatch of supply and demand.

On the one hand, there are as many as 200,000 unsold new apartments throughout South Korea, most of them in provincial areas. As a consequence, quite a few homebuilders in those regions could collapse under the weight of a growing financial burden.

On the other hand, apartment prices remain high in Seoul. True, the prices are not as high as a couple of years ago. But they have started to go up in some areas - an unmistakable indication that even the US subprime mortgage crisis has not made much of a dent in the strong demand for homes in the capital.

There may not be an easy solution to the problem of matching supply and demand in different regions. But there should be many effective ways to tackle the problem.

One plan comes from President Lee Myung-bak, who was experienced in building apartment complexes. He served as CEO of a leading construction company.

He said it was necessary to bulldoze old residential districts in Seoul so that new apartment complexes could be built there. New satellite cities could also be created.

"We will have to provide as many homes as possible where they are needed. We will have to use urban areas to the maximum before building new towns (around Seoul)," Lee said.

He said the old policy had created a vicious cycle of reducing the supply of homes in urban districts and raising property prices.

Urban redevelopment is not as simple as it may seem. The government will have to ease many of the construction regulations if it is going to provide more homes in urban areas.

First among the regulations that has to be eased is the floor space index, or the ratio of the total floor space of a building to the size of the lot on which the building is located. Some apartment complexes which have indices hovering around 2 would have slightly higher indices if redevelopment permits were issued.

Under these circumstances, few apartment owners will agree to redevelopment proposals because they would not be profitable enough. On the other hand, it will be impossible to ease the floor space regulations as much as desired by apartment owners, as that would create more traffic congestion. A compromise has to be struck.

The Korea Herald

(China Daily 04/03/2008 page9)