Will the Korean market for modular homes take off?

MUTO is the name of a modular home located between an old apartment building and a house in the Cheongdam-dong neighborhood of Seoul’s posh district of Gangnam.

The home has a futuristic look with 18 cubes attached in a crisscross way. Each cube was made at a plant, brought to the site, and assembled there. MUTO is used as a residential building for foreign workers of POSCO, Korea’s biggest steel producer.

Wednesday was a cold day, with the temperature dropping below zero Celsius day and night. But the modular house experienced no cold at all, even without a heating system on, thanks to double windows. “This is a perfect home with a kitchen counter, refrigerator and even a washing machine,” said an Uzbek tenant.

So what makes a modular home different? Inside the building, 18 rooms are laid out along the hallway. After the groundwork is done, each room and the hallway are carried to the site and then just three days are needed to assemble the house.

Though the Korean housing market has long been in the doldrums, detached houses have grown popular partly due to the bursting of the apartment bubble. Apartments used to be considered good investments.

For those who want to move out of an apartment, a modular home is a good option with a lower price tag and a short construction period. About 80 percent of a modular home is manufactured in plants, including floors, walls, electric wiring, floor heating systems, the main entrance and bathrooms, then the parts are assembled on the site, just like Lego blocks.

A modular home is wrongly considered to be not safe or strong enough, but it has a steel-framed, reinforced concrete construction. The technology and designs for modular homes have been greatly advanced to near the level of high-quality homes. The market is huge in Japan, and many Korean builders have been assessing the potential of the Korean market.

The biggest strength of a modular house is the short construction period. In the case of MUTO, construction was done in 45 days from beginning work on a parking lot site to the opening of the dorm. On average, it takes three to six months to build a house.

The shorter building period saves financial costs including loan interest. Construction cost is also cheaper, with 4.3 million won (4,000 U.S. dollars) per 3.3 square meters, or 10-20 percent lower than normal home building costs. The modules can also be dissembled and carried to other places.

Construction companies have begun responding to the growing demand for modular homes. For instance, POSCO A&C, which has focused on export, has launched a task force to advance into the domestic market. Samsung Heavy Industries is said to be assessing the market`s potential in Korea.

Japanese companies with decades of experience in the sector such as Misawa Home and Sekisui Heim are entering Korea. Building a modular home through a Japanese company will cost about 7 million won (6,500 dollars) per 3.3 square meters because all the parts are built in Japan and brought to Korea. Yim Hyeok, director of ES Heim, the Korean partner company of Japan`s Sekisui Heim, said, "In Japan, modular homes are high-quality units for high-income families. Japanese homes are strong in earthquake-proof structure and excellent insulation function.”

One of the biggest obstacles in the Korean market for modular homes is the misleading notion that a unit is cheap.

Kim Hee-jeong, head of Fides Development, said, “Demand for modular homes will definitely grow because the construction period is short and the house can be built on a small lot in a big city without a noise problem. But for a while, demand will be higher for residential complexes such as dorms or residential buildings for rent purposes than for individual homes."

yunjung@donga.com