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Analysis on the Recent Housing Construction Boom : Focusing on Public Housing Sites

Jiyoon Oh 2017/11/30

※ This report is to be featured in KDI Economic Outlook 2017-2nd Half.

■ The consistent growth in housing construction seen in the past five years was influenced not only by demand factors such as the housing economy boom but also by the real supply of public housing sites.

○ The supply of housing, the largest since the boom in housing construction during the ‘1st Phase New Town’ project, was made possible by the concentrated supply of land—previously designated as housing sites—to the capital region in the past several years.

- Despite the difficulties in selling public housing sites that were designated early on during the Roh and Lee administrations to private companies due to a sluggish real estate market, the recent rebound in the housing economy has drastically increased demand in the private sector. Accordingly, this has ramped up the supply of public housing sites together with LH’s increasing motivation to reduce its debt.

○ Indeed, the impact of public housing sites is so significant that it could sway the entire housing supply market. Of the recent supply of apartments, 39% were on public housing sites nationwide and 55% in the capital region.

■ Future policies to expand the housing supply through public housing sites should be designed with caution, considering both the merits and faults.

○ When public housing sites are already developed, a rise in housing demand is followed by a rapid increase in new housing construction. This helps to slightly alleviate the inflationary pressure on housing prices.

○ However, it should be noted that it could also intensify the volatility of housing construction as the government’s housing supply plan is not impervious to the conditions of the housing economy,

- Within Korea’s public sector-led housing supply, the government develops the housing sites but the construction is dependent on the private sector. Thus, when the housing economy slows, the government experiences difficulties in providing public housing sites due to the weak demand.

- In this context, the timing of the designation of housing sites and housing supply are highly fluid depending on the condition of the housing economy. So, a boom in housing construction coupled with a supply of public housing sites is likely to intensify the volatility in housing construction.

Enquiries: Jiyoon Oh (Fellow at KDI) (044-550-4074,
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