Korea elected a new President on 8 May 2017, with liberal opposition candidate Moon Jae-in winning by the largest margin in the country’s history following a corruption scandal which engulfed former president Park Geun-hye.
While much of President Moon’s policies have yet to be fleshed out in detail, a number of his key policies could likely impact the real estate sector:
Conglomerate reform
The new administration has pledged to reform Korean business giants by eliminating malpractices such as insider trading and the awarding of contracts to affiliates.
The government hopes reform measures will improve the long term growth prospects of conglomerates as well as support the growth of the small business sector. Such measures may have a broad impact on the real estate market, including a potential uptick in commercial office demand.
Improving foreign relations
President Moon has shown a willingness to improve ties with China by dispatching special envoys to the country. Relations between the two countries have been strained since Seoul’s decision to deploy a THAAD missile defense system in mid-2016.
The government has expressed hopes for an easing of retaliatory measures, including a ban on Chinese group tour arrivals, which followed the deployment of THAAD. With Chinese tourist arrivals plunging 67 per cent y-o-y in April, any easing of restrictions would be welcome relief for local retailers and hoteliers.
Expansion of housing policy
The new administration has announced a plan to build an additional 170,000 public rental apartments per year and invest KRW 50 trillion (US$ 45 billion) over the next five years in ‘Urban Revival Projects’ to improve infrastructure in dilapidated areas.
The government’s significant investments in the housing sector are aiming to improve the welfare of lower income households. No specific investment plans or policies have been announced to date which are likely to affect the broader residential market. Nevertheless, the government has announced it will target record household debt levels which is likely to result in existing LTV ratios on mortgages being maintained and a stable interest rate environment being prioritized. The outlook for the overall residential market is therefore likely to be stable.
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