Concerns arise as housing supply indicators plunge in S. Korea

[Photo by Yonhap]

Key indicators measuring housing supply in South Korea, including housing project approvals, new construction, and new apartment sales, have seen a sharp decline in the first half of this year. Notably, the numbers for construction and sales that determine the scale of apartments available for occupancy two years ahead have hit their lowest levels in history.

The related industry is facing difficulties in venturing into new housing projects due to increased construction costs and the burden of project finance loans, leading to concerns that a housing shortage may trigger a surge in housing and rental prices in the next 2 to 3 years.

According to the Ministry of Land, Infrastructure, and Transport on Tuesday, the total number of housing project approvals in June stood at 31,679 units, down 37.5 percent from a year ago. The accumulated number of approvals for the first six months of this year came to 189,213 units, the lowest since 2020.

More alarming is the decline in new construction and apartment sales. In the first half of this year, the total number of new housing starts in the country amounted to 92,490 units, less than half of last year’s figure.

The situation is similar for apartment sales. The total number of new apartments put up for sale in the first half of this year was 66,447 units, down 43 percent from a year ago. This is the lowest number of new apartment sales recorded since 2013 when data compilation began. The year 2013 also marked the previous lowest record for apartment sales, with about 126,389 units available for sale, nearly double the current figures for this year.

Approved plans, new construction, and apartment sales are considered the three leading indicators of housing supply. Under housing regulations, project developers are required to begin construction within five years after receiving approval. Typically, construction starts within 1 to 2 years after approval, with an additional 3-year timeframe for sales and occupancy. The current concerns stem from the possibility of a housing shortage and subsequent increases in housing and rental prices within two years.

“While the government has set a target of supplying 2.7 million houses, it is crucial to thoroughly assess whether it is progressing properly to prevent a supply shortage in advance,” said Kim Sung-hwan, an associate research fellow at the Construction & Economy Research Institute of Korea (CERIK).