[EDITORIALS]More apartments neededThe falling apartment supply in Seoul and neighboring Gyeonggi province is now in a serious state. The number of apartments being constructed in Seoul and Gyeonggi province as of August this year was down 23.6 percent from the same period of last year. There are less than half the number of apartments being constructed as before the current Roh Moo-hyun administration took office. If this trend continues, the apartment supply will be reduced to the level of the late 1990s, when the nation was hit by a financial crisis.
Until 2001, about 110,000 apartments in Seoul and 250,000 apartments in Gyeonggi province were built every year. In 2002, 160,000 apartments were built in Seoul. There are analyses that Seoul apartment prices are showing signs of stabilizing as a result of the increased apartment construction during the early 2000s, rather than the real estate measures applied by the incumbent administration.
However, since the administration started to apply a tight grip on Korea’s real estate regulation, 58,000 apartments were built in Seoul in 2004 and the number dropped to 51,000 in the following year. As only 24,000 apartments were under construction as of August, the number of apartments built this year is expected to be less than 40,000. The drop in apartment supply in 1998 and 1999, right after the financial crisis, has contributed to rising apartment prices since 2001. The decreasing number of apartments under construction in recent years has the potential to raise apartment prices in a few years.
Moreover, it is worrisome that the recently announced government plans to publicly display the prime cost of apartment construction will further freeze apartment construction in the private sector.
The housing supply rate in Seoul last year was 89.7 percent. This means apartment supply is insufficient. The only solution to stabilize apartment prices in the long run is to increase supply by any means. In the past, apartment prices, which were hard to control even with various regulations in the ’70s and ’80s, dropped sharply after five new cities including Bundang supplied 2 million apartments at once.
The government, believing that rising apartment prices are caused by speculation, has only concentrated on pressing down demand through means such as raising property taxes and restraining regulations on apartments for reconstruction.
Expanding supply is a surer way of stabilizing apartment prices than increasing regulation.