Daegu Mayor Choo Kyung-ho presides over the sixth Emergency Economic Countermeasures Meeting at the Daegu Metropolitan City Architects Association Hall on Thursday, where the city unveiled its plan to normalize the local housing market. [Daegu city government]
Daegu Mayor Choo Kyung-ho presides over the sixth Emergency Economic Countermeasures Meeting at the Daegu Metropolitan City Architects Association Hall on Thursday, where the city unveiled its plan to normalize the local housing market. [Daegu city government]

Daegu is moving to normalize its housing market, taking preemptive steps to address a looming supply shortage as unsold units decline and upcoming move-in volume is set to drop sharply.

Mayor Choo Kyung-ho convened the sixth Emergency Economic Countermeasures Meeting at the Daegu Metropolitan City Architects Association Hall on Thursday and announced a plan to normalize the city's housing market.

The city had imposed a freeze on approvals for new residential construction projects in January 2023 after a surge in unsold units driven by oversupply from large out-of-town construction companies.

As a result, unsold units fell sharply — from 13,987 in February 2023 to 4,162 at the end of August this year. Of the current unsold inventory, 80.1 percent consists of mixed-use residential units in commercial zones. Monthly housing transaction volume also recovered to 2021 levels, averaging 2,593 units in the first half of this year.

Move-in volume, however, has dropped from 33,103 units in 2023 to 10,752 this year and is projected to fall further to just 2,846 next year — less than a quarter of the roughly 12,500 units considered an adequate annual supply.

Signs of instability have also emerged in the rental market, including rising jeonse and monthly rent prices and declining transactions, prompting the city to pursue a proactive expansion of supply.

Starting this month, the city will lift the freeze on new housing construction approvals — a return to normal approval procedures for the first time in about three years and eight months since late January 2023.

To prevent a renewed rise in unsold units, approvals will focus on quality housing after a comprehensive review of location, project scale and infrastructure conditions. Projects that remain unbroken ground for an extended period may have their approvals revoked if necessary.

The city will also expand integrated review procedures to accelerate housing supply.

General buildings will be subject to integrated review across three areas — architecture, landscape and traffic — while residential construction projects will cover eight areas, including fire safety, disaster prevention and education. Redevelopment and reconstruction projects will fall under nine areas. The city expects the streamlined process to cut review periods by up to one year, down from the previous standard of more than 18 months.

The city will also introduce measures to improve the financial viability of reconstruction and redevelopment projects. Sunlight review standards for apartment buildings will be unified at 80 percent by November, down from 100 percent for reconstruction projects and 80 percent for private-sector projects.

A residential living zone plan will be introduced to encourage resident-led redevelopment and expand floor-area-ratio incentives. The city will also support early reconstruction assessment costs and project feasibility consulting, and improve transparency in association management through a redevelopment project management system.

The city will also push ahead with redevelopment of aging planned cities. The program covers 138,254 households across 189 complexes in 18 residential districts spanning seven zones, including Jisan-Beommul, Seongeo and Chilgok.

Daegu plans to enact related ordinances by December and begin drawing up zone-by-zone redevelopment master plans from January next year. To prevent reconstruction projects from clustering at once, the city will group two to three complexes starting with pilot districts and carry out integrated reconstruction on a phased schedule through 2040.

Incentives to boost participation by local construction companies will also be strengthened. Companies from the region that take part in redevelopment projects will receive floor-area-ratio incentives of up to 43 percentage points, and public contribution requirements for aging planned-city projects will be reduced based on the level of local participation. The city will actively encourage local subcontracting participation rates of 70 percent or higher.

Daegu will also petition the central government for support for regional housing markets. The city plans to request an additional deferral of the third phase of the stress debt service ratio rules for regional areas, an extension of capital gains tax and comprehensive real estate tax exemptions for unsold completed units in regional markets, and an increase in the Korea Land and Housing Corporation's purchase price for unsold completed units from 90 percent to 100 percent of appraised value.

"We have been managing housing supply in Daegu due to unsold units, but the time has come for preemptive action against the risk of a supply shortage," Choo said. "We hope to guide the stable supply of quality housing that residents want, and to bring renewed vitality to the local construction sector."


kbj7653@heraldcorp.com