Korea to prop up housing market, open bids for KTX

By Korea Herald

Published : Dec. 27, 2011 - 16:57

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The government on Monday set out a plan to build 450,000 new homes and implement early social overhead capital to energize the local construction market and shore up cash-strapped builders next year.

It also plans to adopt an open bidding process for the operation of new high-speed rail lines, shifting from its initial policy to keep a state-run firm in place to serve public interests.

The Ministry of Land, Transport and Maritime Affairs presented the comprehensive package as the centerpiece of its 2012 policies on Tuesday to President Lee Myung-bak.

During the meeting, Minister Kwon Do-youp singled out people’s livelihoods, revitalizing the economy, and safety and dignity as keywords for the ministry’s operations next year.

As part of its plan, the ministry will also strive to slash car accident fatalities by 10 percent and facilitate public transportation across the country, Kwon said.

A prolonged slump in the domestic real estate market has been a thorny problem for policymakers as it not only dampens housing sales and construction but triggered a string of bankruptcies among mid-size builders this year.

Under the latest plan, the ministry will build 450,000 new homes with 150,000 for low-income earners and make available 64 percent of SOC for 2012, worth 13.7 trillion won, during the first half of next year.

It is also looking to help ailing construction firms with technology exports to reach its goal of securing $70 billion in overseas orders, up more than 20 percent from this year’s some $57 billion. The previous record was set last year at about $71.6 billion.

Early this month, the ministry said it will lower capital gains taxes on home transactions for multiple homeowners and ease regulations on apartment redevelopment in affluent southern Seoul.

It also promised more support for low-income earners who have been suffering from runaway home rental prices. That includes a cut in mortgage rates to 4.2 percent from 4.7 percent for first-home buyers with an annual income of less than 50 million won ($43,200).

But the government is likely to face controversy in the coming months over the policy shift in the operation of bullet trains, called KTX, which is currently run by KORAIL.

Through open bidding, ministry officials expect to lower the prices of train tickets and rein in technical and maintenance flaws that sparked a series of breakdowns and minor accidents early this year.

But some analysts said the plan could erode the rail system’s purpose of serving the public as it causes excessive competition among private operators who only seek profits and shy away from unfeasible routes.

By Shin Hyon-hee (heeshin@heraldcorp.com)

Korea Herald
Korea Herald
Articles by Korea Herald

Korea to prop up housing market, open bids for KTX

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