Korea should introduce new housing policies amid population decline: Report

[Photo by MK DB]

South Korea should fundamentally overhaul its housing policies ahead of 2025 when the national population begins a full-scale decline, according to a research institute.

In a construction trend report released Monday, the Construction & Economy Research Institution of Korea (CERIK) stated that “while the domestic construction and housing markets have been driven by policies and industrial systems that focused on population growth and excess demand, this may now need to change starting next year, as the country enters a phase of population decline, signifying a structural shift in demand.”

According to Statistics Korea, the country’s population is expected to peak at 51.75 million this year before starting to decline in 2025, reaching about 46.27 million by 2052.

The population is expected to decrease at an annual rate of 0.2 percent until 2036, after which the decline will accelerate, with more than 200,000 people lost annually from 2041.

The ratio of the working-age population for those aged between 15 and 64 is also anticipated to drop to 51.4 percent in 2052 from 71.1 percent in 2022, meaning only one in two people will be available for productive activities.

By region, the population in non-metropolitan areas has been declining since 2019. This trend is expected to continue through 2052, with the population in these areas dropping by 4.03 million to 21.56 million in 2052.

The decline will hover around 100,000 annually from 2025 to 2035, and exceed 100,000 annually thereafter.

In contrast, the metropolitan area‘s population is projected to grow until 2033. The metropolitan population is expected to increase by more than 30,000 annually until 2027 before slowing to less than 20,000 annually from 2030 and peaking at 26.51 million in 2033.

The research institute noted that the growing decline trend has increased demand volatility in the housing and construction markets, emphasizing the urgent need for housing policies that respond to low birth rates and changing demographic structures.

As of 2022, with more deaths than births, the population is naturally declining. Statistics Korea data indicates births will increase to 280,000 in 2036 from 246,000 in 2022, while deaths will rise to 480,000 in 2036 from 360,000 in 2022. By 2052, the natural population decrease is estimated to reach 512,000.

”Housing policies such as housing supply and housing finances have been primarily led by the public sector, focusing on newlyweds and families with newborns,“ the institute said, criticizing that these existing policies have not produced substantial effects.

It suggested that policies should be interconnected and focus on expanding housing infrastructure and services, rather than just supporting individual households.

It also highlighted the need for industries and markets to develop diversified business models and portfolios.