Low Birthrate Hits Housing Market in Korea

The low birthrate is affecting Korea's housing market, with an increasing number of childless couples and one-person households leading to a decrease in demand for homeownership.

The Construction and Economy Research Institute of Korea predicts that demand in the housing market will drop by 7,000 to 8,000 homes each year. In the early 2000s, demand for homes was around 500,000 per year, but that has dropped to 430,000 and will fall even further to 360,000-370,000 in 2020, and to 300,000 in 2030.

The low birthrate has reduced the average size of Korean families, destabilizing demand for housing. According to Statistics Korea, the average family size shrank from 3.12 people in 2000 to 2.69 people in 2010. The number of single households is rapidly increasing, jumping from 2.2 million a decade ago to 4.14 million by the end of last year.

As a result, one or two-person households account for nearly half of all households with 8.34 million. Park Jae-ryong, a senior researcher at Samsung Economic Research Institute, said, "One or two-person households prefer to rent rather than buy, so the Korean housing market could shift to a rent-oriented market from the currently dominant preference of ownership."

The slump in demand has led to increasing numbers of empty homes, which went up by 10 percent over the last five years, from 728,000 in 2005 to 794,000. And in newly built apartment buildings, the situation is worse. The institute's analysis of the occupation rate of apartment buildings in the Seoul metropolitan area as of February revealed that one in four apartments is empty. In Incheon, half the new apartments that were ready to let last year remain empty.

Nam Hee-yong of the Korea Housing Institute said, "We urgently need mid- and long-term policies to avoid the same trouble as Japan, which is seeing more and more empty homes and a rapid decline in housing demand."

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