By Lee Hyo-sik
Staff Reporter
State-run and private builders have been shying away from providing small apartments over the years to construct larger ones for higher profits, making it difficult for newlyweds and low income households to own homes.
The supply shortage of apartments smaller than 99 square meters has significantly increased prices of small apartments, as well as ``jeonse,'' a rental system unique to Korea, hitting low-income families who cannot afford to buy more expensive larger apartments hard.
According to Kookmin Bank Tuesday, local construction companies have supplied 18,947 new apartments in Seoul and its adjacent areas since October last year. But the number of apartments smaller than 99 square meters in size accounted for only 2.6 percent, or 494.
Over the past few years, the supply of small apartments has continued to fall as most private builders have become reluctant to build them owing to low profitability. According to the Ministry of Construction and Transportation, 53,929 new small apartments were provided in 2006 across the country, down from 144,564 in 2002.
The supply shortage has boosted prices of small apartments as well as rents, putting heavy financial burdens on young couples and the low-income bracket who usually reside in them.
Real Estate 114, a local property information provider, said apartment prices increased by an average of 2.4 percent last year in Seoul, Incheon and Gyeonggi Province, but prices of small apartments surged nearly 11 percent.
It projected that the supply shortage of small apartments will deteriorate and further push up prices, paired with a rise in the number of single-member or couple-only households. According to the National Statistical Office (NSO), about 42.6 percent of the country's households consisted of no more than two members in 2007.
``Private builders will likely continue to remain reluctant to supply small apartments as a state-imposed cap on prices of new apartments will further make the construction of them less profitable,'' said a real estate market analyst at Real Estate 114.
Against rising small apartment prices and rents, more tenants have borrowed money from banks and other financial services companies to meet rising housing costs.
A number of families without homes have delayed purchases on the expectation that they could buy houses at a cheaper price because of a range of government regulations, including a cap on prices of new apartments.
The trend has in turn raised jeonse sharply, forcing many tenants to turn to financial institutions for loans. Under the jeonse system, the tenant gives a landlord a large deposit and lives rent-free for the contract term, receiving the whole deposit back at its termination.
The Korea Housing Finance Corp. (KHFC) extended a total of 2.5 trillion won to those who rented homes last year, up 46.5 percent from 805 billion won a year earlier. Also, commercial lenders were estimated to have extended a combined 2.8 trillion won in loans for home lease.
A KHFC official said many tenants have taken a wait-and-see attitude on housing purchases over the past year, expecting home prices to fall further amid the sluggish housing market because of a series of anti-speculations measures.
``But it has increased the demand for rental homes, particularly among those who want to live in small apartments, pushing up prices and rents,'' he noted.
leehs@koreatimes.co.kr
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