"Housing Investment Drops 20%, Potential Loss of 220,000 Jobs"

[Asia Economy Reporter Onyu Lim] Due to the impact of the novel coronavirus infection (COVID-19), it is forecasted that if housing investment decreases by 20% this year, production inducement will decrease by 47.1 trillion KRW, and approximately 220,000 jobs related to housing will disappear.

According to the Korea Housing Industry Research Institute (KHIRI) on the 29th, housing investment this year was expected to decrease by 15.4% (14.4 trillion KRW) due to housing market regulations, but it is likely to decline more than initially projected because of the impact of COVID-19.

If housing investment decreases by 20% this year, production inducement is analyzed to decrease by 47.1 trillion KRW, and about 220,000 jobs in the housing-related sector will disappear. Applying the situation where the decrease in real estate service sales became visible 1 to 2 years after the financial crisis, the real estate industry could lose a market worth 8.5 trillion KRW within 1 to 3 years as service industry sales decline due to COVID-19.

Kim Deok-rye, head of the Housing Policy Research Office at KHIRI, explained, "In the past two economic crises, the crisis was triggered in the financial market and then transferred to the real economy, and as financial restructuring was completed, the real economy crisis was quickly resolved. However, COVID-19 appears to be developing in a way that the crisis gradually spreads from the real economy to the financial market, so the process and spread of the crisis are slower, and the duration and magnitude may be prolonged."

According to KHIRI's own survey, currently 88% of housing construction companies recognize the housing industry as being in crisis, and 65.5% believe it is difficult to maintain their business. In particular, 67.9% of small and medium-sized housing construction companies are experiencing difficulties in business management, and among them, 11.3% are at a level just before bankruptcy.

When asked about their thoughts on the government's housing market regulation policies, 49.3% of respondents answered that the current housing market regulations are "excessive and undermine the basic principles of the market economy." While the government's supply expansion and transaction regulations are perceived as good regulations, price regulations and housing project financial regulations are seen as bad regulations.

KHIRI advised that measures to revitalize the housing market to overcome the COVID-19 crisis should include ▲ easing excessive regulations that suppress demand ▲ supplementary measures to activate transactions ▲ compensating for the decrease in supply of sale housing with rental housing ▲ strengthening public financial support in response to the contraction of private finance ▲ and detailed implementation tasks to alleviate excessive burdens on housing developers.

Kim said, "Housing market measures in response to COVID-19 should be implemented decisively in two phases?Phase 1 in May and Phase 2 in November?covering all policy alternatives, rather than dozens of trial-and-error activation measures as after past foreign exchange or financial crises. This approach is desirable in terms of effectiveness."

This content was produced with the assistance of AI translation services.