One in Four Rental Apartments Remains Unsold

It was reported that among the public rental apartments that the Korea National Housing Corporation (KNHC) is building, one in four units are yet to be pre-sold.

In particular, in the Seoul Metropolitan area, a large number of rental apartment units have been waiting to be pre-sold for more that six months. In addition, the government has a plan to build an additional 490,000 units in this area by 2012. Therefore, it has been pointed out that complementary measures are necessary.

On September 23, the National Assembly Construction and Transportation Committee said that as of the end of June, of the 32,064 rental apartment units that KNHC is pre-selling across the country, 7,903 units or 24.6 percent remain unsold.

Gyeonggi Province has 5,104 unsold units, or 37.3 percent of the 13,702 units put up for sale, despite predictions that it would have the highest demand for public rental apartments.

The ratio of unsold rental apartment units to units under construction stands at 32.6 percent in Gangwon Province. For northern Chungcheong Province and northern Gyeongsang Province, those numbers stand at 23.5 percent and 21.9 percent, respectively, both of them exceeding 20 percent of total units under construction.

In the Seoul metropolitan area, more than half of the area’s unsold rental apartment units, 3,325 units (52.7 percent of units under construction) were put up for sale last year. What it means is that they have remained unsold for a long time, ranging from six months to more than a year.

The large number of rental housing units that remain unsold has been attributed to the fact that those public rental apartments have been built in new lots on the outskirts of cities, instead of inner-city areas that are inhabited mostly by lower-income people, the potential end-users of the units,

Some point out that demand for public rental apartments has been decided by rule of thumb. The argument goes, when a decision is made on demand for those houses, only the number of households that do not meet minimum housing standards are taken into account, whereas the housing supply to demand ratio per region, and population increase and decrease data are not factored in.

Jae-Seong Hwang jsonhng@donga.com