Japan's 'empty house crisis' to hit Korea, too

By Choi Sung-jin

Concerns about the oversupply of housing are turning into a reality, as the recent push-driven construction of apartments by local builders has led to a crop of vacant dwellings, industry sources said.

According to the population and housing census released by Statistics Korea Wednesday, housing in Korea, including vacant dwellings, totaled 16.37 million as of Nov. 1, 2015, an increase of 1.62 million, or 11.0 percent, from 14.75 million in 2010.

About 1.07 million dwellings were unoccupied, 6.5 percent of the total, the census showed. The number of vacant dwellings increased from 197,000 in 1990 to 365,000 in 1995, 513,000 in 2000, 728,000 in 2005 and 819,000 in 2010.

The number of apartments totaled 9.8 million units, accounting for 59.9 percent of all housing, recording an increase of 1.26 million over the period. However, uninhabited apartments numbered 570,000, 5.8 percent of the total, an increase of 200,000 from five years ago.

There were 271,000 unoccupied dwellings in Seoul and its vicinity, 3.7 percent of the total in the capital area. The number of uninhabited dwellings outside of the capital area totaled 798,000, or 8.9 percent of the total, more than double that in the capital city and its environs.

By region, Gyeonggi Province had the largest number of vacant dwellings with 145,000, followed by North Gyeongsang Province (108,000), South Jeolla Province (103,000), South Gyeongsang (99,000), Busan (87,000), Seoul (79,000), South Chungcheong and South Jeolla (74,000 each), Gangwon (59,000), North Chungcheong (55,000) and Incheon (47,000), according to the census.

Sejong, an administrative town in South Chungcheong Province, marked the highest ratio of empty housing with 20.3 percent as 16,000 out of its total of 81,000 remain unoccupied, followed by 13.8 percent in South Jeolla and 10.9 percent in North Gyeongsang.

Korea’s housing supply rate shot to 118 percent in 2014, but new housing has since been put on the market without fail.

According to the data of the Ministry of Land, Infrastructure and Transport, the number of construction permits last year hit a record high of 765,000. In the first half of this year, too, the ministry issued 355,000 building permits, up 18.4 percent from a year ago.

The housing supply totaled 520,000 last year, almost twice as high as the 270,000 on average per year between 2000 and 2014. This year will also likely see an additional supply of new housing reaching 450,000 units.

More than 900,000 units will be added to the housing supply over the next two years, the highest number since the 1990s. More than 800,000 were added to the supply from 1994-95 when the government built two new bedroom communities near Seoul _ Ilsan and Bundang _ and from 1997-98 when the Asian financial crisis hit the nation. However, the previous two massive housing supplies cannot be compared with the current one, as the national housing supply rate remained at around 80 percent then.

On Aug. 25, the government announced a policy package to curb swelling household debt, which called for, among other things, reducing the housing supply. Acknowledging the government’s failure to forecast housing demand correctly, Vice Minister Kim Kyung-hwan said, “Over the next two to three years, we may have to experience the adverse effects of housing supply gluts, such as declines in housing prices and an accumulation of unsold dwellings.”

Meanwhile, Japan’s Ministry of Internal Affairs and Communications has announced that the number of vacant dwellings totaled 8.2 million, 13.5 percent of the total of 60.63 million units as of October 2013.

The “empty house crisis” is always hitting the neighboring country where one in every seven units remains unoccupied. The Japanese ministry is considering leasing 4.3 million vacant dwellings to low-income families.

The problem is that this crisis will deepen as the years go by with the ministry expecting that the number of uninhabited units will increase to 10 million in the next 10 years and increase to 20 million in 20 years amid the aging society and shrinking population.

“Korea is chasing Japan with about 20 years of time difference in demographic structure by age groups,” said Song In-ho, a fellow at the Korea Development Institute. “As a result of a simulation based on the assumption that what’s happening in Japan now will occur in Korea 20 years from now, we found Korea’s real home prices will begin to fall beginning in 2019.”

If Korea’s aging population follows the pattern of Japan, the nation will have to strive hard to maintain a certain level of inflation to prevent housing crisis stemming not from price hikes but price plunges, he added.